Four of the bidders in Guyana’s maiden offshore auction have accepted the terms of its new production sharing agreement (PSA), the Ministry of Natural Resources announced on Wednesday.
The auction, executed last year, saw the S3 and D2 Blocks awarded to Sispro Inc., while the S4 Block was granted to TotalEnergies, Qatar Energy, and Petronas. International Group Investment Inc. and Montego Energy received the S5 and S10 Blocks. The S7 Block was awarded to Liberty Petroleum Corporation and Cybele Energy, and the S8 Block went to ExxonMobil, Hess, and CNOOC. Lastly, the D1 Block was awarded to Delcorp Inc., Watad Energy, and Arabian Drillers.
Per the ministry’s update, all except the Exxon-led consortium and Sispro Inc. have agreed to the terms. They said Exxon is still reviewing the PSA, while the ministry is awaiting a response from Sispro Inc.
The new PSA has a 10% royalty rate, up from the 2% in the Stabroek PSA. The 75% cost recovery ceiling in the Stabroek PSA has been lowered to 65% in the new model contract. The sharing of profits after cost recovery will remain 50/50 between the government and the contractor. Additionally, a corporate tax of 10% will be instituted, where there was none before.
Exxon Guyana’s President Alistair Routledge had said last year that the company has no qualms with the fiscal terms. However, it is the punitive measures that are of concern.
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“Can you really in the deep water or even in the shallow water move that quickly to acquire [a] contract, acquire data, process data, and make decisions with extremely short periods, unusually short for offshore? So, we think that that’s challenging,” he explained at an Oct. 2023 press conference.
Vice President Bharrat Jagdeo had explained that the PSA was crafted with international expertise to ensure the country’s fiscal regime for oil was on par globally. Jagdeo in response to Routledge that year had said: “We are not going to weaken the PSA to suit ExxonMobil… If they do not want to sign it, fine.”
Sispro Inc. told OilNOW recently that they have not finaslied the award because of “regulatory compliance” issues.
Industry analysts have put Guyana’s new fiscal terms on par with those of its peers in Latin America. An August 2023 report done by S&P Global showed that the Guyana basin remains attractive as an investment destination, even with the new terms.
