Major interest from Middle East to develop remaining oil blocks in Guyana – VP

The content originally appeared on: INews Guyana
Vice President Bharrat Jagdeo in his virtual appearance at the summit

The Government of Guyana, which has yet to decide whether it will go the route of auctioning remaining oil blocks offshore Guyana, has nevertheless been the recipient of significant interest, particularly from Middle Eastern companies, to partner with the state in developing these blocks.

This revelation was made by Vice President Bharrat Jagdeo, who participated in a Policy Dialogue as part of the 2022 Bloomberg NEF New York Summit. But Jagdeo made it clear that a decision has not been made yet on how these remaining oil blocks will be treated.

“That determination is going to be made by September. We’ll decide whether we will auction these future blocks and whether we’ll do so with seismic or without seismic. Or if we’ll invest the resources in a national oil company with strategic partners,” Jagdeo explained to the attendees.

“We’ve had a lot of interest from large operators in the Middle East for that sort of becoming a strategic partner. Now we’ve not determined, because there has been a big issue that ExxonMobil and the others already have large tracts of land, two areas. So, there’s been a public issue about concentration. We’re yet to determine whether we’ll allow those large operators, particularly in that Stabroek Block, to bid on future auctions, if we go the auction route.”

Meanwhile, Jagdeo also reiterated his Government’s plan for both spending and saving the oil revenues, which he noted must benefit current and future generations and also aid in strengthening the non-oil economy and climate mitigation efforts.

“How do we spend the money, to avoid the curse? We’ve outlined that, we said world class education for our people, world class healthcare, producing the infrastructure of the future, the roads, the power plants, the highways, the sea defences, so that we can stimulate growth in other industries.”

“That’s why we’re focused so much on agriculture and diversification. We believe in saving a substantial part of these resources. We believe if we do that, then we can avoid some of the problems other countries have,” he said.

Countries getting into the business side of oil and gas is nothing new. In neighbouring Brazil, Petrobras is a well-known example of a State-owned oil company. Venezuela also has its own State-owned oil company, Petroleos de Venezuela (PDVSA). There is also the Petroleum Company of Trinidad and Tobago Limited (PETROTRIN).

However, the latter two companies have not fared well, with PETROTRIN closing its refinery and laying off thousands and PDVSA closing and then reopening, amid Venezuela’s economic meltdown.

Guyana has long been expected to go out and auction oil blocks, both untapped and relinquished. Considering the more than 25 oil finds that have been made by oil giant ExxonMobil in the Stabroek Block, the country is likely to be in a good position to leverage the value of those blocks when the context of the global oil and gas industry is considered.

The relinquishment clause is typically included in contracts so that companies can relinquish a portion of the block when the renewable period is up, thereby allowing other companies to buy into the respective blocks.

For the Stabroek and Canje Blocks, operators are required to relinquish 20 per cent of their blocks after the first renewal period; while those of the Demerara and Corentyne Blocks are expected to relinquish 15 per cent within this period.

The Kaieteur Block’s relinquishment provision is said to be 25 per cent, then 20 per cent by the first renewal; with the Mahaicony and Roraima Blocks at 25 per cent. By the time of the first renewal for the Orinduik Block, the operators are not expected to relinquish any portion.

Last year, ExxonMobil had applied to the Government for a one-year extension before it would be mandated to relinquish portions of the Stabroek Block, where it has made a plethora of discoveries. In its application, Exxon had cited the effects of the COVID-19 pandemic.