Guyana adds unitisation clause to oil contracts

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Guyana’s new offshore model petroleum agreements have added a unitisation clause to treat with reservoirs that straddle multiple contract areas, or that straddle a contract area and an open area. 

The clause dictates that a Contractor shall notify the Minister with responsibility for Petroleum of the existence of such a reservoir within 60 days of identification.

The Contractor would be required to furnish the government with a technical analysis that determines the possible existence of the shared reservoir, its general characteristics, and the assessments used to determine its existence, including information obtained during the drilling of wells that helped determine that the discovery exceeded the limits of the contract area. 

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After receiving such a notification, the Minister would direct the Contractor to submit a proposal to unitise the reservoir, with a proposed work program for the unit development of the reservoir. If the Contractor doesn’t, the Minister can then establish the terms and conditions to govern the unitisation. 

If the unitisation process detrimentally affects an obligation of the Contractor, or a right it has under the petroleum agreement, the Minister may grant an extension. 

A Contractor may also petition the government to incorporate an open, unlicensed area into the existing contract area if the discovered reservoir so extends. 

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The government is also expected to update Guyana’s principal oil law, the Petroleum (Exploration and Production) Act to formalise the ongoing licensing round and the terms in the new model agreements. The current Act includes unitisation provisions, but they are not in the current offshore contracts.  

The new contracts will be used to renegotiate existing deals, except for the ExxonMobil-held Stabroek Block contract, under which oil production is ongoing. The contracts will also apply to offshore blocks issued in the ongoing licensing round. 14 blocks are on offer. 

Click here to get more details on the Licensing Round:


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