– in favour of Guyana should Tullow and Eco (Atlantic) strike oil here

A PRODUCTION Sharing Agreement (PSA) inked between the Government of Guyana, Tullow Guyana B.V and Eco (Atlantic) Guyana Inc indicates that the country could benefit from as much as 60 per cent in oil profit, including a one per cent royalty once the companies commence pumping for oil in the Orinduik Block.

Tullow Oil, parent company of Tullow Guyana B.V., is a leading independent oil and gas exploration and production company, which has interests in 90 exploration and production licences across 16 countries that are in West Africa, East Africa and ‘New Ventures’, which includes Guyana and French Guiana.

Eco (Atlantic) Oil and Gas Inc. is a small, independent international oil and gas exploration company based in Toronto, Canada. It has a 40 per cent interest in the Orinduik Block, while Tullow Oil has 60 per cent.

According to the Petroleum Contract, which was signed on January 14, 2016, once the recoverable costs have been satisfied, the profit will be shared between the government and the contractor for each field, based on an established system. This could see Guyana receiving a profit share as high as 60 per cent and as low as 50 per cent.

“The balance of crude oil and/ or natural gas available in any month after recoverable contract costs have been satisfied to the extent aforesaid (hereinafter referred to as “Profit Oil” and or “Profit Gas’ as the case may be) shall be shared between the government and the contractor for each field…,” Article 11:04 of the Petroleum Agreement states.

For the first 25,000 barrels of oil, Guyana is in line to receive a profit of 50 per cent. For the next 25,000 barrels, the country’s profit would increase to 52.5 per cent and 55 per cent for the next 15,000 barrels. For the subsequent batch of 15,000 barrels of oil, Guyana would benefit from a 57.5 per cent profit and 60 per cent profit for more than 80, 000 barrels of oil. The profit will be shared between the government and contractor on a monthly basis.

According to Article 15:06 of the Petroleum Agreement, a one per cent royalty is included in the government’s share of profit. “The government’s share of profit oil specified in Article 11 includes royalty payable by the contractor at the rate of one per cent of crude oil produced and sold, and delivery to the minister, pursuant to Article 14 of his share of profit oil equivalent to royalty shall constitute payment of such royalty in kind,” the agreement states.

The agreement also provides for associated gas produced from an oil field within the contract area to be used for the purposes of the operations of production and production enhancement of oil fields, such as gas injection, gas lifting and power generation.
3D seismic operations in the Orinduk Block were completed early September 2017, and according to the Natural Resources Ministry, processing and subsequent interpretation will follow with the possibility of drilling in 2019.

“Both companies are very optimistic about the prospects for recoverable petroleum in the Orinduk Block,” the ministry said in a statement.
It was noted too that the terms of the contract are the same as those for Esso (Exploration and Production) Guyana Limited and partners Hess and CNOOCN.

The Natural Resources Ministry released the Petroleum Agreement the government signed with Tullow Guyana B.V. and Eco (Atlantic) Guyana Inc. in keeping with its commitment to release major contracts between the government and companies in the extractive industries sector.

In the interest of transparency, it said, it will continue to make Petroleum Agreements available to the public. Contracts entered into with ExxonMobil and its joint-venture partners, Ratio Guyana Inc. and CGX Energy have already been released and are on the ministry’s website.