The ExxonMobil consortium which won an oil block in the 2022 bid round and licensing auction is still in talks with the government on the agreement, Country Manager Alistair Routledge has said as he underscored prioritizing incentivizing his firm’s investment.
“The important thing is we continue to have that discussion in a collaborative way to try to find an agreement that works for all parties; that incentivizes the investment; incentivizes taking the risk because these are blocks with no discoveries. So having to take the exploration risk, invest money and ultimately timely not knowing if you will make any money back,” Routledge told a press conference he hosted on Wednesday at his office’s Duke Street location.
The government has already named four companies it hopes to sign agreements with this year and the ExxonMobil consortium for shallow block S8 is not on that list. But Routledge said he could not give a timeframe for when he thinks the discussions could bear fruit. “It always seems like it goes on and on. I don’t want to speculate,” he said while noting that in his experience in negotiating one can never predict when it would finalize.
The four companies are blocks S4 – TotalEnergies, Qatar Energy, and Petronas; S5 – International Group Investment Inc; S7 – Cybele Energy; and S10 – International Group Investment Inc.
Since last August Minister of Natural Resources Vickram Bharrat had said that all six companies that had been awarded oil blocks from Guyana’s first auction have been granted approval by the government and have indicated that they are willing to pay the respective signing bonuses. As such, they had been issued the new Production Sharing Agree-ment (PSA) for perusal, pending signing.
Bharrat had told a mid-year press conference he hosted at the Forestry Commission in Kings-ton, Georgetown that it would mean more money going into state coffers as it was 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,” he had said.
But the ExxonMobil consortium has not accepted the PSA as is and is locked in discussions as it hopes to gain more on the non-fiscal side of the contract.
The government has said that its new PSA for companies far outweighs the 2016 PSA deal that ExxonMobil currently has. The royalty rate will be 10%, up from 2%, cost recovery ceiling has been reduced to 65% and a 10% corporate tax has been included. Profit share will remain 50% each.
While Routledge noted that the government said it was not backing down on its fiscal terms in the contract, he did not make clear what else his company needed with regard to more “incentivizing”.
However, he pointed out that companies stand to lose the most when they enter PSAs where they invest all the money for exploration, as there was no immediate way to know if they would come up with dry holes.
