Guyana seeking US$1.9 billion in work commitments for first offshore bid round

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Kemol King
Kemol King is an independent journalist with six years of experience in Guyana's media landscape, contributing to OilNOW on a freelance basis. He covers the oil & gas sector and its impact on the country's development.

Guyana is targeting US$1.9 billion in commitments for its first offshore competitive licensing round, with safeguards to ensure contractors work swiftly and diligently.

The bid round for offshore blocks opened on Monday, December 12, 2022 and included deepwater blocks (D1-D3) between 1,500 and 2,000 sq. km and shallow water blocks (S1-S11) between 2,800 and 3,100 sq. km.

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For each block, the government has prescribed an initial period for contracts to conduct 3D seismic tests, as well as geological and geophysical studies. Shallow water licenses are granted two renewal periods, and deepwater licenses get three. One exploration well is required for each renewal period, and additional seismic may be done during the first. The government has prescribed expenditure amounts for each period, as a performance guarantee that is reduced as the contractor performs against them. The total prescribed expenditure for each deepwater block is US$290 million, while for shallow water blocks, it is US$95 million.

The government opened a virtual data room on Monday, accessible after payment of the US$20,000 participation fee. Legal entities have until April 7, 2023, to express their interest and pay the participation fee.

For both categories of blocks, the contractor must relinquish 50% of the acreage at the end of each period, except for the final renewal period which requires relinquishment of the entire block. However, if a commercial discovery is made, the contractor gets to keep the block for 20 years under a production license, with the option of renewal for 10 additional years.

Operators must hold at least 35% of interest in a block if a consortium bids. Non-operators must hold at least 5% interest. The government has outlined criteria for technical competence, financial capacity, and health, safety, and environmental record, to ensure that companies can do the work and adhere to Guyana’s vision for environmental protection.

Awardees will be expected to offer a minimum signature bonus of US$20 million for each deepwater block and a minimum US$10 million for shallow water blocks.

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When it comes to evaluation, the signature bonus and the work commitment will be weighted 50/50. Companies will have to specify a tiebreaker bonus in case scores add up to a tie.

Annual payments will also be required for license holders, of US$1 million for rental of the acreage and US$1 million for a training fund to build local capacity for the oil and gas sector.

Deemed competitive, fiscal terms introduced for this bid round significantly improves the government’s take compared to the heavily criticised Stabroek Block PSA. The contractor will be required to pay a royalty of 10% of petroleum produced and sold. Sixty Five percent (65%) of gross production is allocated for cost recovery, after which, profit oil will be split 50/50 between the state and the contractor. As for taxation, the contractor will pay income tax (10%) and property tax (0-0.75%) subject to application of Guyana’s Petroleum (Exploration and Production) Act 1986.

Bids must be submitted by April 14, 2024. The evaluation period will conclude on May 5. Negotiations will occur from May 8 to May 26 and contracts will be awarded on May 31.

The Guyana government is optimistic that there will be commercial discoveries outside of the Stabroek Block. For this auction, President Dr. Mohamed Irfaan Ali said 25 billion potential barrels are at stake.

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