-reviewing new Production Sharing Agreement
All six companies that had been awarded oil blocks from Guyana’s first auction have been granted approval by government and have indicated that they are willing to pay the respective signing bonuses, as such, they have been issued the new Pro-duction Sharing Agreement (PSA) for perusal, pending signing, Minister of Natural Resources, Vickram Bharrat, announced on Wednesday.
“Every single one of those six companies for the eight blocks… have submitted their applications to us. We have given the PSA and they are currently reviewing that and they intend to sign and all of them have indicated that they are ready to pay their signing bonus,” Bharrat told a nearly four-hour-long mid-year press conference he hosted at the Forestry Commission in Kingston, Georgetown.
He reminded that it would mean more money going into state coffers as it is US$10 million for shallow water blocks and US$20 million for deep water. “We expect and will ensure that the signing of the signing bonus will be made with the PSA.”
The Minister said that for some, the process has been a long one but that government was working on a PSA that could be used for all of the companies while bidders were seeking out financing and investors.
“I apologize. I know personally that it has taken longer than it should have but it is not the fault of the technical team at the ministry or anyone. It is mainly because we had to work with the bidders. Some of them, especially the locals were looking for international partners. They were looking for investors and operators so we had to work with them. And we were ready but we can’t do a separate PSA for everybody. We had to finalise one PSA that can be used for all the companies,” he expressed.
Finalised
“A few bidders held up the others because we wanted to finalise that one PSA that can be used. That PSA has been finalised and it is with the bidders with no changes to the fiscal terms; the 10% royalty, the 10% tax, the 65% cost recovery as against 75% and 50/50 profit sharing,” he added.
The successful companies were Sispro Inc (Guyana), awarded S3 Block; Total Energies EP Guyana BV, Qatar Energy International E&P LLC, Petronas E&P Overseas Ventures SDN BHD (Malaysia), awarded S4 Block; International Group Investment Inc, awarded S5 Block; Liberty Petroleum Corporation of the US and Ghana-based Cybele Energy Limited awarded S7 Block; Exxon/Hess/CNOOC awarded S8 Block; International Group Investment Inc, awarded S10 Block; Delcorp Inc Guyana, comprising Watad Energy and Communications Limited & Arabian Drillers of Saudi Arabia awarded D1; and Sispro Inc (Guyana) awarded D.
The 2022 Licensing Round, Guyana’s first-ever auction, was initially announced in December 2022 by President Irfaan Ali. After several extensions and updates to the fiscal framework, the auction concluded with six bidders submitting 14 offers for eight of the 14 oil blocks offshore Guyana.
Vice President Bharrat Jagdeo had said in October of last year that if one of the larger companies agreed to the draft Production Sharing Agreement, this country’s government would be ready to collect the money and deposit it, but if another company wanted time to finalise plans, they will be given that scope. “We want to do a good job. Time is not the issue here; it is doing a good job. Ensuring that the due diligence is done, and getting a proper contract signed. We are not running a sprint here,” he had said, adding, “so if it takes one month in some cases and three in another, providing a good job is done…
“In the discussions, we will know if people are serious. If a company said ‘we need two years,’ we can’t have that. So, let’s have the discussions first with the companies and… then get a decision on the maximum time.”
In January this year, he updated that those companies which accepted awards would have had until the end of that month to submit additional documents requested by government for the due diligence process.
The Vice President explained that firms were given awards based on initial documents submitted, but were told since then that they would have to submit other documents as needed for the due diligence process with government before any agreement could be reached.
“We assessed the proposals on a number of criteria. Now we have to verify what are in those proposals… before the final signoff. We have to do the due diligence to see what was in the proposal that won the bid [that] the companies can meet those obligations and they have the wherewithal to address those issues.
“That is where we are now. The source of funds have to be legal and everything attached to it [scrutinized],” he added.
Then in May, following a report by Reuters of an announcement by Minister in the Ministry of Public Works, Deodat Indar that an agreement had been reached with one of the companies, Jagdeo clarified that no contract has been entered into but that the consortium of Qatar Energy, Total Energies, and Malaysian state-owned oil firm, PETRONAS, had gone the furthest in current negotiations with the government.
On Wednesday, the Minister of Natural Resources explained that with each company getting approval, all of the companies are now on equal ground but that signing of contract dates could come sooner for some than others. “We would have mentioned that [the consortium of] PETRONAS, Qatar and Total would have advanced and were slowed down a bit by the others because we wanted all companies to have the PSA… so all companies are in the position now that they would have received the revised PSA and they are reviewing that with the possibility of signing very soon. Some may sign before some,” he said.
“All six companies have indicated that they are in a position now to pay the signing bonus which is required upon signing the PSA. We are not going sign any agreement with any of the companies if they are not signing the signing bonus…,” he added.
