As Guyana gears up for oil production, possibly within days, the Department of Energy (DE) is pursuing discussions with a few companies for the potential placement of the country’s first 3 cargoes from its entitlement, as part of measures to introduce the Liza grade crude to the market.
While Request for Proposals (RFP) will ultimately be issued, inviting companies to bid for the marketing of the government’s share of oil from the Liza Phase 1 Development, the DE says a decision has to be made for the introduction phase of the grade into the market.
“After careful consideration, the DE has decided to initiate a conversation with very few selected companies for a potential placement of the first 3 cargoes of its entitlement. This is not inconsistent with the Petroleum Agreement, that allows Government to sell its entitlement, if it so wishes, to the Operator. The DE has taken the decision to go wider than this in the short-term,” Director of the Department, Dr. Mark Bynoe, told OilNOW when contacted.
Dr. Bynoe said the DE is going through the introduction of the new Liza grade crude to the market in full realisation that the quality of the crude and its yield have not yet been tested within a refinery system. “The DE has taken the view that a few selected IOCs with a global refining footprint and integrated oil value chains are well placed to support the DE during this incubation, launching phase,” he stated.
“The aim of this short-term approach is to protect the value of Guyana’s crude so that when the term RFP is issued for the Liza Grade Crude, it is not priced down,” the DE Director stated.
Bloomberg said in a report on Friday that at least half a dozen traders from Houston, Geneva and London are set to arrive in Guyana over the weekend to bid on some of the first oil cargoes to be produced by the country. The report said the three cargoes being offered are an “appetizer for a bigger prize.” After this sale, part of an “incubation and launching” phase, Guyana plans to sell its crude via long-term contracts, Bloomberg had reported.
Oil production from the 120,000 barrels per day Liza Phase 1 Development could soon get underway at the Stabroek Block where US oil major, ExxonMobil is operator with a 45% interest. Hess and CNOOC are co-venturers at the block with 30% and 25% interest respectively.
Under the PSA terms, Guyana is set to receive 2% royalty and half the profit oil when production begins.
