Auctioning of remaining oil blocks to commence within 2 weeks – VP Jagdeo

The content originally appeared on: INews Guyana
Vice President Dr Bharrat Jagdeo speaking with reporters

…PSA being rewritten, to be finalised through public process

After a year of planning and much anticipation from both local and foreign onlookers, the Government will be moving to begin auctioning Guyana’s remaining oil blocks offshore within two weeks’ time.

This announcement was made by Vice President Bharrat Jagdeo, when asked by the media on the sidelines of an event on Friday. He informed the media that “within two weeks, we’ll launch the auction.”

Last month, the Vice President had disclosed that Government will be auctioning 14 oil blocks before the end of the year, under new conditions which can see the country benefiting from as high as US$20 million signature bonus and the doubling of royalties and corporation taxes.

Oil blocks offshore Guyana

He had noted too at the time that work will be done to fine-tune the terms of the auction, including the new fiscal conditions that will govern new oil contracts as well as all future Production Sharing Agreements. On Friday, Jagdeo updated reporters on that process.

“We’re working on a rewrite… we’re rewriting the entire PSA. So once that draft is available to us, we’ll share it with the oil companies, with the local private sector and then we’ll work to finalise it and get comments through a public process.”

It was previously reported that the bidding round for the oil blocks would last for about five months and will be open to both local and foreign companies, who will have to meet certain minimum technical and financial qualifications.

Since the discovery of oil in 2015, the Guyana offshore basin has seen unprecedented development, with Guyana setting a new paradigm for expeditious development of oil and gas resources.

According to S&P Global, “the four- and-a-half-year timeframe from discovery to the first production places Guyana first among global deep-water jurisdictions in terms of the average time to bring major discoveries on stream”.

Just last month, the Guyana Government had decided to auction 14 oil blocks offshore in the coming months under new fiscal conditions that can see the country benefiting from as high as a US$20 million signing bonus along with royalties more than doubling and the imposition of corporation taxes.

Out of these 14 offshore blocks that will be up for auction, 11 will be 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.

In addition, the Guyana Government has also taken a decision to place ring-fencing on the contracts instead of the blocks up for auction since those are small. Jagdeo had previously explained that is the most efficient way to allow the developers to maximise projects within an area.

The auction is expected to attract global interest, although experts have warned that it is important to balance the PSA’s (Production Sharing Agreement) fiscal terms.

During a recent visit to Guyana, Norwegian consultancy Rystad Energy Vice President Shreiner Parker noted that while Guyana will get interests from around the globe when it goes out to auction its oil blocks, getting the financial terms of the blocks right would be very important. He had given the example of Brazil.

“In recent years, they’ve had unsuccessful bid rounds. Even though Brazil is an extremely important source of offshore production globally, they were unable to attract the interest that it wanted, because the fiscal regimes were too onerous. And they were asking for too much.”

“So, the balance that Guyana will have to strike on these new blocks is understanding that we’re no longer going to have the Stabroek fiscal regime. We are a petroleum province. Yet at the same time, we cannot expect that it’s a guaranteed success and that every hole poked into the ground will produce oil. So, getting that fiscal regime correct is going to be paramount to attracting interest globally,” Parker had said.