Significant interest in Guyana’s oil bid round – Jagdeo

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

…investor interest for almost every single economic sector

A little over a month since the People’s Progressive Party/Civic (PPP/C) Government put Guyana’s oil blocks on the international market for bids, Vice President Bharrat Jagdeo has said that there has been significant interest in buying a stake in Guyana’s oil and gas reserves.

With Monday set as budget day, Jagdeo in a recent interview reflected on the period between the previous budget and the upcoming one. He referenced the economic growth and increased investor interest in Guyana, noting that the country needs both foreign and local investors.

When it comes to the bid round recently launched for Guyana’s oil blocks, Jagdeo noted that this has also attracted significant investor interest. In fact, Jagdeo emphasised that investor interest has extended to nearly every major sector in the economy.

“We’re hoping to capitalise on the interest in Guyana, because a lot of people are interested in our country. One, we have a predictable, clear economic strategy. Our business environment is a very competitive one. And it’s becoming even more competitive and encouraging. In terms of the fiscal incentives available to invest in Guyana.”

“So, it’s not a surprise that so many people are interested. We’ve already gotten quite a bit of interest in the new bid round, that we launched for the oil blocks. And we have interest in almost every single area, from agriculture to manufacturing to construction, because they all recognise that this country has a great economic future.”

According to Jagdeo, Guyana’s economic future is not a given. As other countries have found out to their detriment, the economic future can be eroded by poor policies and a “fickle government that is not clear on what it wants to achieve.”

The Vice President made it clear that they don’t want to emulate A Partnership for National Unity (APNU), who while in Government from 2015 to 2020, did not want to renegotiate the oil contract with ExxonMobil but have since changed their tune now that they’re in the Opposition.

In December 2022, President Dr Irfaan Ali officially launched the much-anticipated first auction of the remaining oil blocks. 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. However, most of the blocks are approximately 2000 sq km. A minimum signing bonus of US$10 million was set for the shallow water and US$20 million for the deep-water blocks.

“We’re hoping that the close 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 had 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.

Guyana has long been expected to go out and auction oil blocks, both untapped and relinquished. There are relinquishment clauses, which are 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.

A new model Production Sharing Agreement (PSA) has also been developed by the Government, to guide participating companies at the auction on what fiscal terms to expect. The new PSA includes terms like a 10 per cent royalty rate, an increase on the previous 2 per cent in the former Government’s PSA it signed with ExxonMobil. The cost recovery ceiling is now 65 per cent, a decrease from 75 per cent. Companies will for the first time also pay a corporate tax, 10 per cent.