Govt wants uniformity in non-fiscal terms before signing contracts with oil block awardees – VP Jagdeo

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

The Guyana Government is expected to meet with the awardees from last year’s inaugural oil block auction to iron out the non-fiscal terms that would be included in the contracts.

At his weekly press conference on Thursday, Vice President Dr Bharrat Jagdeo disclosed that the negotiation with one of the oil block awardees has been completed and the contract is ready to be submitted to Cabinet.

A total of eight new oil blocks – two in the deep-sea area and six in shallow areas – were awarded to six groups in October last year.

However, Jagdeo noted that the government wants to see uniformity in the non-fiscal terms so that all the oil contracts have the same conditions.

“At Cabinet level, the last thing we want is to have the fiscal terms preserved in every contract but then in every contract the other conditions of the contract for the same type of work are changing. So, what we want is a kind of uniform [non-fiscal] clauses in all of the contracts because if we go earlier with one and then we’re negotiating the technical agreements with the others, then we may end up with a different set of concerns raised etc.,” he explained.

Consequently, the Vice President revealed that Natural Resources Minister Vickram Bharrat and his team are expected to meet with the oil block awardees to have discussions on the non-fiscal terms to come up with an agreed set of conditions.

“So, they’re gonna have a final meeting [next] week with all the parties involved to look at the technical comments and then make sure that whatever goes to Cabinet – some will go earlier to Cabinet – that it will be a contract that will be acceptable to all the parties.”

“Remember, we made it clear that the fiscal terms are non-negotiable but we’re still prepared to look at the non-fiscal terms because they complain that it’s pretty onerous. We went from one extreme to the other extreme in terms of not having any consequences for having a block and not doing anything to this massive, could be two or three hundred million US dollars, fine…,” Jagdeo posited.

The People’s Progressive Party/Civic (PPP/C) Administration last year introduced a series of stringent terms and conditions for new oil deals that the country will sign. These include 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 the previous 75 per cent, while maintaining the retention of the 50-50 profit-sharing after cost recovery.

The 2016 oil contract for the Stabroek Block signed between the ExxonMobil-led co-venturers and the then A Partnership for National Unity/Alliance For Change (APNU/AFC) Coalition Government for production in the oil-rich Stabroek Block had been heavily criticised for low royalty, lack of ring-fencing provisions and cost oil claims that saw Guyana losing billions, among other issues.

Back in February, VP Jagdeo noted that the Government is willing to consider reviewing the non-fiscal terms in the new PSA. Based on feedback received, it was said that Guyana’s new PSA is one of the toughest oil contracts in the market.

According to the Vice President at a press conference earlier this year, “We got a lot of feedback that the increased fiscal terms might be acceptable but there were some several other areas where the conditions were too tough. We had too tough a condition globally… If they become too onerous that is where we may have to make adjustments… [But] we made it clear there will be no changes on the fiscal terms. We’re not changing the fiscal at all.”

Currently, the Guyana Government is negotiating with the six groups that were awarded blocks in the country’s inaugural oil blocks auction held between 2022-2023.

The bidding round, which was launched in December 2022, closed off in September 2023 with six companies bidding on eight of the 14 blocks offshore that were up for grabs. In total, there were 14 offers made on those blocks – two deep-sea blocks and six shallow-area blocks.

Among those awarded oil blocks during the bid round was a Guyanese female-led company, Sispro Inc., which received a shallow block (S3) and a deep-water block (D2). Other shallow blocks were awarded to Total Energies EP Guyana BV in consortium with Qatar Energy International E&P LLC and Petronas E&P Overseas Ventures SDN BHD (Malaysia), which got Block S4; Liberty Petroleum Corporation of the US and Ghana-based Cybele Energy Limited, which got Block S7, and International Group Investment Inc of Nigeria, which got two blocks – S5 and S10.

Another shallow block, S8, was awarded to the Stabroek Block partners – ExxonMobil Guyana Limited, Hess New Ventures Exploration Limited, and CNOOC Petroleum Guyana Limited. The second deep-water block – D1 – was awarded to Delcorp Inc. Guyana, which comprises Watad Energy and Communications Limited and Arabian Drilling Company of Saudi Arabia.

The review of the non-fiscal terms would be a key factor as the Guyana Government prepares for its second auction, possibly at the end of this year. The government is awaiting Exxon’s relinquishment of 20 per cent of oil-rich Stabroek Block in October this year to determine the schedule of the next bidding round.

Jagdeo had noted previously that the Stabroek Block relinquishment would generate excitement for the next auction and the government would not want to kill interest if potential investors find the current terms and conditions in the new PSA onerous.