THE government is in the process of finalising the new fiscal terms and conditions of Guyana’s remaining oil blocks, to allow for the moving forward with the much anticipated oil blocks auction, which is scheduled to begin before the end of the year.
The fiscal terms are of great importance in enabling Guyana to gain maximum economic benefits in the sale of Guyana’s offshore blocks. Speaking on the sidelines of an event at the Pegasus on Monday, Minister of Natural Resources, Vickram Bharrat, said that, notwithstanding the government still deliberating on the fiscal terms, the auction will go ahead this year.
“We have moved significantly towards starting the process. Cabinet will soon finalise the new fiscal terms that will be implemented for those new blocks that will be up for bidding,” Bharrat related.
Guyanese are eagerly awaiting the government’s decision on the fiscal terms for the sale of oil blocks, given the dissatisfaction with the fiscal terms that were negotiated in the existing Production Sharing Agreement (PSA) that the country has with ExxonMobil.
The fiscal terms set out the profit sharing and taxation arrangement with companies. In the current PSA with ExxonMobil, Guyana gets 50 per cent of profit oil and two per cent royalty.
However, there have been longstanding calls for Guyana to get better terms in any future contracts, particularly given the massive potential of the offshore basin.
The Stabroek Block, which is owned by Exxon and partners Hess and CNOOC, has over 11 billion barrels of oil equivalent (boe). This figure is expected to increase as exploration continues.
In a statement issued last Friday, the Ministry of Natural Resources, noted that, in the deliberations of the fiscal terms, the government is seeking to obtain a fair share, manage risks, remain competitive, encourage investor confidence and maintain the pace of development.
“The government of Guyana will be embarking on an intensive promoting campaign… which will ensure that the competitive bidding round is successful for the future development of the offshore exploration and production of hydrocarbons for Guyana’s economy,” the statement said.
Once it commences, the bidding process is expected to last a few months; however, the duration for this is also still under consideration.
“We haven’t decided definitively on a timeframe whether we will give three months, four months or six months. Those are some of the practices around the world, for the company to prepare the bid documents and ensure that they submit a proper proposal to the government of Guyana to be reviewed, and to review all the terms and conditions of the bidding process. And also [for them to] have an opportunity to look at the data that is available in Guyana,” Bharrat said.
According to Bharrat, the government is also still in the process of mapping out the blocks that are available and no decision has been made as yet on if the government will keep back some of the oil blocks for a “National Oil Company” (NOC).
“We know block C for sure is available. There is relinquished acreage in the Canje block, and there is a few other blocks for example, the Demerara and Berbice block that are available so more data will be released very shortly. We are expecting that as soon as Cabinet finalises those new fiscal term that we will release all information,” Bharrat noted.
As to the decisions on the NOC, Bharrat said: “No decision made as yet; we’re still looking at the possibilities, what are the advantages what are the disadvantages. We haven’t made any definitive decision with regards to that as yet.”
