CGX secures two more years with the Kawa-1 discovery area

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Kemol King
Kemol King is a journalist with six years of experience in Guyana's media landscape. He covers the oil & gas sector and its impact on the country's development.

Chief Executive Officer of Frontera Energy, Orlando Cabrales, said Thursday that the Corentyne Block joint venture (JV) – CGX Energy and Frontera – filed a notice of potential commercial interest in recent months with the Guyana government for the Kawa-1 discovery.

This means, when the relinquishment clause kicks in early next year, their license will remain in force with respect to the Kawa-1 discovery area for two years.

The relinquishment was originally set for  November 27. However, CGX Energy, the operator, declared force majeure because it was unable to initiate drilling as scheduled. The Noble Discoverer drillship was stalled in Trinidad with Shell, and could not make the expected arrival date of October 22. According to the JV, the government agreed to the declaration of force majeure, and to an extension of the deadline to January 31, 2023.

According to Guyana’s Petroleum (Exploration and Production) Act – the principal legislation governing current offshore operations – when such a notice is served, the operator can apply for a production license at any time within this two-year period.

The Minister with responsibility for petroleum may then direct the licensee to conduct investigations and studies with a view of assessing the feasibility of a development of the discovery. The operator would then have to submit to the Minister, within the period, reports, analyses, and data derived from its investigations.

So, how long will CGX have control of the Kawa-1 discovery area? Applicable law dictates that a notice of potential commercial interest must be served to the government within 30 days of the submission of the results of the discovery. Hence, CGX had to have submitted the notice about May, when the JV announced a discovery at Kawa-1 for a second time, for it to be consistent with the law. Such a submission period would grant CGX an extension with the Kawa-1 discovery area until the second quarter of 2024. However, the Minister may extend this period if he finds it necessary.

Meanwhile, CGX is all set to drill Wei-1 in January. Professor Suresh Narine, Executive Co-Chair of CGX’s Board of Directors, said: “All pre-drill activities are complete and all necessary services, materials and support vessels are contracted.”

The partners mean to build on their success at Kawa-1. They had said that the Kawa-1 results have increased the chances of success at Wei-1 from 29% to 56%.

On Thursday, the JV also announced the completion of an agreement to transfer majority ownership of the Corentyne Block to Frontera. The deal allowed CGX to secure the funds needed to take care of its share of financial responsibility in relation to Corentyne Block operations. CGX’s 66.66% stake is now reduced to 32%, and Frontera’s stake has increased to 68%, pending the filing of customary documentation with the Guyana government.


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