Already coming out with the best responsive bid during evaluation for the one-year contract to market Guyana’s oil, Saudi Arabian company, Aramco Trading Limited, was also awarded the single-lift slated for this month to avoid this country having to forfeit its one million barrels of crude, Minister of Natural Resources Vickram Bharrat says.
He also confirmed that Aramco’s contract “is for a year; the 12 months starting from September to August next year” and would include the scheduled September 22nd lift.
The one-time approval was done simultaneously to give the procuring entity, the Ministry of Natural Resources (MoNR), and the National Procurement and Tender Administration Board (NPTAB), the time needed to complete the requirements of the Procurement Act and is the reason the decision has not yet been formally announced by the NPTAB, sources at the agency say.
“Why we had to push ahead with this lift is that the time was short and the window was closing, and if we did not finalise the company to do this lift, it would have become what is called a distressed cargo,” Bharrat told Stabroek News on Sunday.
Bharrat explained that lifts, according to the 2016 Production Sharing Agreement (PSA), are to be removed promptly so as not to hinder production. And if this is not done, the cargo could be forfeited.
In this case, it would mean that the country could have lost at least US$65 million, according to the global price forecast for the commodity.
“A distressed cargo the PSA says that the operator can sell it to recover their cost, and we did not want that so we had to push ahead quickly to finalise this lift, while assuring that the contract and everything is drafted and Aramco is on board,” Bharrat said.
“It is considered to be a distressed cargo [when not claimed] and a distressed cargo cannot attract Brent price and the operator is responsible to discard of that lift, because remember they need the space. They need the space for their share [to start loading] and they could sell it off for any price. That is why I sought Cabinet’s approval for the lift, so we have Cabinet’s approval while that was happening. We did not want to have to enter into a position where we have a distressed cargo of 1 million barrels of oil,” he added.
‘Disposal’
According to Article 14 of the 2016 PSA that covers ‘Disposal of Production’, “each of the parties shall have the right to take in kind at the delivery point and separately dispose of its share of the total quantities of production available under the agreement.
ExxonMobil and partners – CNOOC and Hess – have the right “to use as much production as may be needed in any Petroleum Operations within the contract area and also with the transportation terminal system.”
The quantity of production to which the government is entitled, pursuant to Article 11 that addresses Cost Recovery and Production Sharing, “shall be measured and delivered to the government at the delivery point and the government shall be responsible for all costs and risks associated with the government’s lifting entitlement from and after the delivery point,” the PSA states.
The PSA also informs that “within 12 months after the Minister’s [of Petroleum] approval of a development plan, or within a later period as may be agreed between the parties, but in any event no longer than three months before the first scheduled lifting of crude,” ExxonMobil shall propose to the minister, off-taking procedures to govern the method “whereby the parties will nominate and lift their respective shares of crude oil.”
“The details of such procedures shall be discussed and agreed upon between minister and contractor.”
Major principles guiding that process shall include that, “lifting shall be carried out so as to avoid interference with petroleum operation,” the PSA says.
“In the event that any party shall find itself unable for any reason to lift such quantities of crude oil as are to be lifted in accordance with procedures it shall forthwith notify the other parties to that effect. Such procedures shall include such deterrents as the parties may agree, to prevent a party from delaying the lifting of any quantities of crude oil not so lifted to a later period. In the absence of any agreement to the contract between the parties, the contractor and the minister shall share in each type of grade crude oil in proportion to their respective lifting entitlement of crude oil,” the contract adds.
It is unclear what agreements the two sides entered into pertaining to the procedures.
The Minister of Natural Resources stressed that the agreement would have seen the 1 million barrels as distressed cargo.
Sources at NPTAB told the Stabroek News that the evaluation of bids from 15 countries to market this country’s lift for the next fiscal year has been completed and Aramco has won that tender.
However, according to Guyana’s Procurement Act, a number of steps have to be followed following the determination of the contract winner, and all of those processes have not yet been completed.
Notifying
This includes formally notifying the winning company that it has the winning bid and advising the 14 other companies that they had lost.
The procuring entity has to give the companies a stipulated time, according to the Act, to register their objections in a formal protest if they think they were unfairly treated.
NPTAB has to also be notified of the processes and when all the requirements of the Act have been fulfilled, the document is then sent to Cabinet to note the decision.
The Ministry of Natural Resources and Office of the President, given that the Minister of Petroleum is the President, has to prepare the contract for the company and designate a time for it to be signed.
Earlier this month, MNR had announced, via a statement, that Aramco was selected to market the September cargo.
“Following a transparent public procurement process for the Provision of Marketing Services for the Cooperative Republic of Guyana Oil Entitlement from the Liza Destiny FPSO Vessel, the Government of Guyana has recently evaluated and approved for the nomination of ARAMCO TRADING Limited (ATL) to market Guyana’s 4th lift for 2021, scheduled for September 21 – 22, 2021,” the statement had said.
It added that the evaluation process included administrative, technical, and financial assessments, which saw submissions from fifteen firms. ATL was identified as the lowest compliant evaluated bidder at the price of US$0.025 per barrel.
Aramco is one of 15 companies that were being evaluated to market this country’s oil share from the Lisa Destiny for the next one-year period.
The US 2.5 cents commission quoted in the release as the lowest compliant bidder is the same amount that the company bid in the current process being evaluated and it was the second lowest commission per barrel tendered.
In that procurement process, the Chinese-owned Sinochem International Oil Company Ltd which is registered in London had submitted the lowest proposed sum at US 2 cents.
It must be noted that the NPTAB evaluation doesn’t only focus on the lowest commission, but responsiveness is measured through a number of factors.
According to documents seen by the Stabroek News the companies were scored in a number of areas and had to register a tally of at least 70 points out of 100 to be qualified for evaluation.
These included documents backed with evidence to show Certificate of Incorporation, certified true copies of Memorandum and Articles of Association of the company and/or similar statutory documents, Contact details of the company including the name of authorised contact person(s), official address, email and telephone number (s), audited balance sheet with profit and loss accounts or a certificate issued by a practicing chartered /cost accountant (with membership number and firm registration number) certifying the annual turnover, company Tax Clearance Certificate for the last two (2) consecutive most recent years.
They also had to submit a certified written statement confirming that the Company does not have any director who has been convicted in any country of a criminal offence relating to fraud or any financial impropriety or criminal misrepresentation of falsification of facts relating to any matter, a certified written statement giving details of any pending litigation the bidder may or may not have, signed Bid Securing Declaration Form, signed Bid Form.
On the technical side, they also had to show that their overall general experience in crude oil marketing and trading as a company has at least ten (10) years’ experience.
Specific experience in crude oil trading and marketing volumes by geography over the last three (3) years, with verifiable similar services with NOCs and Governments, were also required.
Crude oil trading and marketing volumes of no less than 20 million bbls within the last year had to also be proved by the potential marketer.
Aramco, sources say, fulfilled bidding documents criteria outlining their overall objectives and strategy for the execution of works as they demonstrated a clear understanding of objectives of contract, assessment of risks and means to mitigate challenges, and gave a logical approach to the overall process.
