While it is unclear how Stabroek Block partner, Hess, came to be the marketer for Guyana’s fourth and last lift of oil for 2020, government yesterday said that it was sold via “a spot sale” by the company and that it had not yet made a final decision on who would be the next one-year marketer of its oil share.
“Three of Guyana’s lifts were marketed by Shell Western. The fourth and final lift for the year was marketed by Hess International Sales via a spot sale. The government has not made a final decision on issuing a contract to a marketer, all possible options are considered so that the country can get the best value for its share of crude oil,” Minister of Natural Resources Vickram Bharrat yesterday told Stabroek News in a written response to questions on the issue.
No explanation was given on how the company was selected or why the arrangement with Shell Western was not extended for it to buy the fourth lift, or if it was the company which had informed of an intention not to continue.
Subsequent efforts to contact Bharrat were unsuccessful as calls to his mobile phone went unanswered.
In late December, Vice President Bharrat Jagdeo had told this newspaper that Guyana sold the fourth and last list of its share of oil for 2020, receiving some US$49.50 per barrel for a total of US$49.3 million. Jagdeo also informed that while this country was scheduled for five lifts last year, COVID-19, coupled with production reduction due to commissioning problems, had hindered that and that the first lift for 2021 would be next month.
The Minister of Natural Resources echoed this posture also pointing out that partners ExxonMobil, CNOOC, and Hess, also did not get their planned quotas. “Guyana’s first year as an oil producing nation, we attained 4 lifts out of the five projected lifts. The reason for not achieving projected fifth lift was hampered by an unscheduled reduction in oil production. It was projected that approximately 120,000 barrels of day would have been produced. Unfortunately, this was not achieved. Guyana’s partners also did not achieve their projected lifts,” Bharrat said.
Shell Western Supply and Trading was selected by the APNU+AFC government to purchase Guyana’s first three cargoes with the hope that by the end of that process a marketer would have been found through a competitive bidding process initiated. The decision to find a one-on-one marketer was only made public following a Bloomberg article that some companies were called on to express interest.
The Department of Energy (DoE), which had faced criticism for its secrecy over the direct sale process being used for the initial cargoes, had justified the decision saying that “competitive pricing” which limits the government’s exposure to market uncertainty was among the criteria that informed the decision.
The company was selected from nine listed international oil companies (IOCs) that had been invited to express interest for the lifting and subsequent placement of the first three cargoes (three million barrels) of Guyana’s entitlement from the ExxonMobil-led Liza development. These included Stabroek Block operator ExxonMobil, and its co-venturers CNOOC, and Hess, as well as other oil majors, including Chevron, Total, ENI and Sol, which were required to submit written proposals and were all subjected to a face to face meeting with the DoE to present the full scale of their capabilities. The companies were also required to lay out the details of their proposals.
When the statement announcing the selection was made, the DoE had said that the face-to-face interactions allowed for “robust interrogation and lengthy clarifications and questions”. This was referred to as “an integral part of the selection process, especially in the context of the nascent nature of Guyana’s experience commercialising crude oil.”
In explaining the basis for the selection of Shell Western Supply and Trading Limited, apart from the competitive pricing, the DoE also cited the size, scale and global reach of the Shell trading operations. Also the company’s high level of integration between upstream, trading and downstream; Shell’s strong foothold in the Latin American markets, and the size and scale of their shipping and storage operations in the region, allowing for multiple options on the Liza crude commercialisation; the range of new grades Shell has recently introduced into the market, and their willingness to share critical refinery information which Guyana needs in order to understand Liza crude behaviour, was stated. The DoE said that the company’s readiness to support it in operating the cargoes, even as it was strengthening its structures and in-house crude commercialisation and human resources, were also factors taken into the decision making process.
Then in opposition, the PPP/C had vowed to exclude the company which concluded the agreement saying that ExxonMobil should have been the marketer of the oil until a contract was entered into.
“They are knowingly entering into a contract with a government that has had its power reduced and should not be tying up any arrangements,” Jagdeo, who was Opposition Leader had said while positing that the arrangement “smacks of corruption”.
“[ExxonMobil] is a publicly-traded company. They can’t tamper with the price and we can verify the price they receive. Allow them to sell the first shipment and then put in a proper system through open public tender for the sale of our oil,” he had advised, while stressing that a new fully empowered government will then be able to determine whether to tender every three months or enter into a long term contract.
He had said that to limit the companies which can bid and then request that they appear face to face leaves room for an enormous amount of corruption. “It betrayed the deep-seated approach of the government. Its proclivity to operate in the dark for corrupt purposes… had the Bloomberg story not been posted I don’t think we would have formally known. We would’ve suspected in the absence of verification,” Jagdeo lamented.
While it is unclear how Hess was selected, it seems as though a similar face-to-face process and determination was used.
