Guyana’s new model agreements set the framework for its natural gas story

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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’s hydrocarbon story has been dominated by oil so far, but its new model petroleum agreements have established a framework that will compel the utilisation and commercialisation of its natural gas resource.

Once contractors discover natural gas fields or excess associated gas that they determine to be commercially viable, they would be compelled by the new terms to develop them. This is in contrast to what obtains at the Stabroek Block, where ExxonMobil has discovered 17 trillion cubic feet of gas, but has prioritised oil production.

When it comes to the development of any oil field, the new contracts stipulate that priority should be given to utilisation of associated gas for oil production enhancement, such as gas injection, gas lifting and power generation. In this regard, the Contractor will be required to grant a plan of utilisation to the government for the associated gas. 

The model outlines a principle of full utilisation, noting that if there is excess gas, the Contractor will carry out a feasibility study regarding the utilisation of it, for inclusion in the development plan or up to two years following its submission. If the Contractor believes that the excess associated gas has commercial value, it will be required to make further investment to utilise it with terms at least as attractive as those which apply to oil production. 

However, if the Contractor ultimately decides to exclude the utilisation of the excess gas from its development plan, the Minister with responsibility for Petroleum can then election to take off the excess gas free of charge. This is provided for, as long as the lifting of the gas does not impact the Contractor’s oil development, and once the Guyana government bears the sole risk and expense of the infrastructure and handling of the gas. 

The parties may also agree that the excess associated gas has no commercial value, in which case, the Contractor would dispose of it in the most economic manner consistent with industry practice.

As for gas fields, the contract gives strict guidance to the Contractor to move toward development of commercial discoveries of oil and non-associated gas. Even the Minister is guided by the agreement to conduct his review of applications for production licenses in a timely manner. If the Contractor elects not to develop the find, it can surrender the discovery to the State so it can find other uses for the resource. 

While the Minister may take his share of the gas to market or otherwise utilise, he may opt to receive his gas entitlement in cash, in which case, the Contractor will purchase it.

Presently, Guyana’s only gas utilisation endeavour is the Gas-to-Energy project – a partnership between it and the Stabroek Block co-venturers to pipe the gas to shore primarily for domestic power generation. 

ExxonMobil is looking very closely at the potential for gas development offshore Guyana. 

The draft contracts are open for consultation, with March 28 set as the deadline for submission of comments. 

Click here to get more details on Guyana’s Licensing Round: https://oilnow.gy/glr2022/

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