THE remaining oil blocks in what has been proven to be a lucrative basin offshore Guyana, are officially on auction and the government will be looking to secure the best deals for Guyanese and, at the same time, establish conditions that are also attractive to investors.

Guyana’s offshore basin has captivated the attention of the global oil-market participants and President, Dr Irfaan Ali  on Friday morning, officially launched the first auction for the development of new oil blocks under competitive terms as the government looks for swift development of oil-and-gas resources.
A total of 14 new oil blocks are up for grabs and the government is hoping to award new contracts by the end of May 2023.

The blocks range from 1,000 to 3,000 square kilometres each, with the majority measuring closer to 2,000 square kilometres. Eleven of these blocks will be located in the shallow area, while the other three will be in the deep-sea area.

There will be a minimum signature bonus requirement of US$10 million for shallow water and US$20 million for deep-water blocks.
The government has also decided to limit the award to a maximum of three blocks to any given company. Each bidder will be required to put up a work programme, since the criteria for assessing the bids will be weighed against the price and the work programme.

Currently, a consortium of companies, Exxon, CNOOC and Hess, are the developers off shore Guyana of a giant block called Stabroek.
“What we are seeking to do is to have the best possible outcome for Guyana, given the lessons we have learnt,” President Ali said.
Although there has been much disapproval of the terms of the Stabroek contract, the government said it honours the sanctity of contracts and will not renegotiate, but other contracts will see improved terms.

President Ali had noted that Guyana wants the best possible deal in terms of revenue, while at the same time not scaring off investors.
The government is in the process of developing a new-model production-sharing agreement that will reflect the indicative terms and guidelines for the licensing round and that will introduce comprehensive provisions reflective of the developments in the oil-and-gas industry and international best practices observed in other jurisdictions.

Bidders will also be required to pay a penalty fee of $30 million if they don’t make financial commitments to the block after it is awarded. This is an effort to ensure there is greater turnover.
The 75 per cent cost-recovery ceiling has been lowered to 65 per cent. The sharing of profits after cost recovery will remain 50/50 between the government and the contractor. Additionally, a corporate tax of 10 per cent will be instituted, where there was none before.

There are relinquishment clauses, which are typically included in contracts so that companies can relinquish a portion of the block when the renewable period is up, thereby allowing other companies to buy into the respective blocks.

The bidding round is expected to last for about five months.