When Frontera Energy Corporation acquired a 33.33 percent share in CGX Energy’s license for exploration in the Corentyne and Demerara offshore blocks in 2018, the Guyana government did not receive revenue from this deal since it was a business-to-business arrangement between the two companies, which is standard in the oil and gas industry.
In acquiring a 33.33% working interest in the two blocks from CGX Energy, Frontera bought these shares in exchange for a US$33.3 million signing bonus payable to CGX. Frontera had agreed to pay one-third of the applicable costs plus an additional 8.333% of CGX’s direct drilling costs for the initial exploratory commitment wells in the two blocks.
Director of Guyana’s Department of Energy, Dr. Mark Bynoe, told OilNOW on Tuesday that a statement contained in a media report which seems to suggest that Guyana received a US$33.3 million signing bonus from Frontera for its CGX farm-in, is misleading.
“Please note that the statement attributed to the Stabroek News is a mistake as no signing bonus was received by the Cooperative Republic of Guyana. Frontera farmed into the CGX blocks in the Corentyne and Demerara Blocks and paid the agreed sum for acquiring the requisite equity under a rights offering agreement. This arrangement is consistent with previous farming-in completed, for example, by Total S.A. into the Orinduik Block,” he said.
“All are urged to continue to peruse the various agreements that was released by the Government of Guyana to reduce these and other misguided statements,” Dr. Bynoe stated, referring to several PSAs which have been published by the Ministry of Natural Resources, including the CGX Energy contract, which outlines terms and conditions of the agreement Guyana has with companies operating offshore.
Guyana’s Finance Minister, Winston Jordan, also confirmed on Tuesday that no signing bonus was ever received by the government for the Frontera-CGX farm-in.
The media report, in quoting an individual, compared the US$33.3 million paid to CGX by Frontera for the acquisition of shares with an US$18 million signing bonus paid to the government of Guyana by ExxonMobil in 2016 for the Stabroek Production Sharing Agreement (PSA). The report suggested that the ExxonMobil PSA signing bonus was inadequate when compared to the Frontera-CGX payment, for shares in blocks where no discoveries have been made.
A former official at Guyana’s Ministry of Natural Resources told OilNOW that Frontera buying shares in CGX Energy for its Corentyne and Demerara blocks is not comparative to a signing bonus paid to the government on signing a PSA. The official said a record-breaking combined signing bonus paid by companies in Brazil back in 2017 for blocks at the Campos Basin, for example, would have been based on the fact that Brazil is an oil producing country with multi-billion barrel proven reserves, and with Campos in particular, already being the country’s biggest oil producing basin. Comparatively the official said, not a single barrel of oil has been produced at Stabroek or any other block offshore Guyana.