Pres Ali officially launches auction for 14 oil blocks offshore Guyana

– April 14 deadline for bids; contracts to be awarded in May 2023

As the Guyana Government moves to have its petroleum resources developed expeditiously, President Dr Irfaan Ali has officially launched the much-anticipated first auction of the remaining oil blocks offshore.
The Head of State made this announcement of the competitive bidding process during a live broadcast on Friday morning.

There will be 14 oil blocks up for tender including 11 in the shallow area and three in the deep-sea area. These blocks will range from 1000 square kilometres (sq km) to 2000 sq km but with most of the blocks being approximately 2000 sq km.
“I am pleased today that we are able to, in this very public manner, launch our bidding round for the 14 new blocks in shallow and deep water.”
“And we’re hoping that the course of the submission of the bids will be on the 14th of April, 2023 and our timeline is to have contracts awarded by end of May 2023. This of course will follow negotiations and evaluation of the bids that we received during this bidding round…,” the President disclosed.
Each bidder would be charged a participation fee of US$20,000 to join the auction and according to President Ali, this cost was settled so as to not dissuade interest in the bidding process. The payment of this fee will allow bidders access to a virtual data room which will have all the details on the blocks so that interested parties can participate in a competitive bidding process.
According to Ali, this auction is being done in keeping with lessons learned over the years in Guyana’s burgeoning oil and gas industry and is aimed at enhancing transparency, and openness, and getting the best possible deal for Guyana. He noted that in order to ensure that latter, the People’s Progressive Party/Civic (PPP/C) Government has moved to implement a sleuth of new terms and conditions for these potential new oil contracts.
These include more stringent relinquishment terms to allow for expeditious development of the country’s petroleum resources.
“We have a situation where there is a timeframe on oil and gas development. We understand the direction in which the world is going so it’s very important for us to have developers who are serious [and] who will, in an expeditious way, move towards the development of the oil and gas resources. So, strong contractual commitments are in place in this bidding round with strong, realist relinquishment obligations,” he stated.
Also, part of the relinquishment clause is the minimum work commitments specified for the initial and renewal periods of the prospecting licence. This consists of a combination of seismic and drilling of exploration wells with the fulfilment of prior commitment as a precondition for renewal.
“…there’s specific commitments that must be met in a phased manner – specific commitments that must be met with specific time bomb deliverables – so that we don’t have blocks held up for a very long time with minimum investment,” he contended.
Another major feature of this auction is improving the financial terms to provide a greater balance of the shared revenue between the Government and contractor, all the while maintaining Guyana’s competitive edge in the Region and globally. This, the Guyanese leader explained, is important since Government recognises that the capital cost for oil and gas exploration and development is not only going up but access to such financing has become more cumbersome due to the global shift from fossil fuel.
Under new conditions, Guyana stands to benefit from as high as a US$20 million signature bonus for the deep-water blocks and US$10 million for the shallow-water blocks. Additionally, all future Production Sharing Agreements (PSAs) will also include the retention of the 50-50 profit-sharing after cost recovery; the increase of the royalty from a mere two per cent to now a 10 per cent fixed rate; the imposition of a 10 per cent corporate tax, and the lowering of the cost recovery ceiling to 65 per cent from 75 per cent.
Government is currently in the process of finalising this new PSA, and according to Vice President Bharrat Jagdeo on Friday, by mid-February 2023 these documents are expected to be completed in time for the close of the four-month bidding process.
Meanwhile, in order to make this auction more competitive, the Government has opened the process to both local and foreign companies/individuals, who will have to meet the minimum technical and financial qualifications that will be outlined.
President Ali pointed out that these minimum qualification criteria are consistent with international best practices on expertise and capital requirements that are necessary to conduct exploration and production activities in shallow and deep-water areas.
“There are different types of expertise to this required for shallow water and deep water; there’s a different type of capabilities that is required for shallow water and deep water. So, the criteria used in this bidding process take that into consideration to ensure that there is great transparency and that those who are participating in the bid meet the minimum requirements but at the same time, there is enough room for greater participation in the bidding,” the Head of State explained.
He further outlined that the qualification bar is set higher for deeper areas, which are more complex and require stronger capabilities for operational activities.
As the world’s fastest-growing super basin in recent years, Guyana is estimated to have potential resources in excess of 25 billion barrels offshore. In the oil-rich Stabroek Block alone, which is operated by ExxonMobil and its co-venturers, there are nearly 11 billion barrels of oil equivalent.
To this end, President Ali “…encourage all those who believe that they could have attractive, and they can attract investors to do so, to participate in this process. We are hoping that there will be maximum participation and that Guyana would be part of a partnership that things greater benefit and create greater wins for our country and our people.”