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Thursday, May 13, 2021

Guyana will be looking to sell oil blocks to highest bidders, country could retain some acreage

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OilNow is an online-based Information and Resource Centre which serves to complement the work of all stakeholders in the oil and gas sector in Guyana.

Guyana’s President Dr. Irfaan Ali confirmed this week that an entirely new system for the allocation of oil blocks will soon be used, signaling the government will move away from direct one-on-one negotiations with International Oil Companies (IOC) and opt for bid rounds where it will be looking for the ‘best offer’.

“We have made it very clear that the process in awarding new oil blocks will be very much different. It will be an open, public process and when we get to that stage it will be a public, open bidding process. We will be looking for the best offer in an open public bid,” Mr. Ali told reporters this week.

He, however, noted that the Government is currently having preliminary discussions on whether Guyana will retain some of its oil blocks.

“…Discussions are still ongoing, it calls for a lot of technical analysis on whether Guyana itself will retain some of those blocks for our own development and to manage by ourselves, but that is very preliminary.”

U.S. oil major ExxonMobil has found more than 9 billion barrels of oil equivalent resources offshore the South American country since 2015, breaking a decades-long dry spell that saw over 40 wells drilled with no commercial find.

These major discoveries have seen calls in the country intensify for government to move away from one-on-one negotiations with IOCs to a bidding process where it can secure better fiscal terms.

“There is considerable pressure these days from the World Bank, the International Monetary Fund, and bodies such as the Extractive Industry Transparency Initiative (EITI) for oil companies and governments to be more transparent,” Guyanese economist Bobby Gossai Jr. said in an OilNOW column last year. “With these initiatives, there is a strong push for governments to allocate acreage on the basis of public auctions.”

However, he pointed out that unless acreage is particularly interesting, the industry has been relatively unwilling to face the kind of magnified, head-on competition that a sealed bid type license round provokes. “It is somewhat unrealistic to expect all governments to allocate all acreage and projects on the basis of sealed bids,” he said at the time.

In neighbouring Suriname, eight blocks covering an area of over 13,524 km2 of underexplored but highly prospective acreage in the western part of the offshore basin went on offer in November 2020 by state oil company, Staatsolie Maatschappij Suriname N.V.

According to bid documents seen by OilNOW, the acreage lies directly in the migration pathway between the onshore producing fields and the recent deepwater discoveries at Block 58, which are both typed to the Albian, Cenomanian & Turonian (ACT) source kitchen.

Analysts have been watching this bid round closely to see how IOC’s react, particularly in the context of the global pandemic that has curtailed demand and stymied investments in the oil and gas industry over the last year.

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