Guyana goes after hefty investments in oil blocks auction

Guyana is accepting bids in its first ever offshore licensing round covering 14 oil blocks both in shallow and deep-water acreages. How is the Ministry of Natural Resources shaping the landscape for these bidders? The minimum work and expenditure commitments are simple. 

Shallow water blocks

– Duration: 5 years split into 3 phases.

  – Phase 1 (2 years): Focused on geological and geophysical studies, along with a seismic commitment of at least 2,000 sq. km of 3D or its 2D equivalent. Companies are bound by a minimum expenditure commitment of US$25 million.

  – Phase 2 (2 years): Bidders will need to carry out additional seismic studies and drill one exploration well, with a commitment of US$40 million.

  – Phase 3 (1 year): One exploration well is the core focus, with a financial undertaking of US$30 million.

Total minimum expenditure commitment: US$95 million.

With new law and contracts, companies have less than two weeks to bid for Guyana oil blocks | OilNOW

Deep water blocks 

– Duration: 10 years, divided into 4 phases.

  – Phase 1 (3 years): Minimum work entails 2,500 sq. km of 3D seismic and foundational geological and geophysical studies. Financially, companies are looking at US$30 million.

  – Phase 2 (3 years): The directive is towards additional seismic work and the drilling of an exploration well, at a commitment of a hefty US$100 million.

  – Phase 3 (2 years) & Phase 4 (2 years): Each phase demands drilling an exploration well and a financial pledge of US$80 million.

Total minimum expenditure commitment: US$290 million.

All 14 Guyana oil blocks attract interest as model PSAs released | OilNOW

Bid evaluation 

The Ministry is taking a balanced approach when evaluating bids:

– Work Commitment (50% weightage): To increase their odds, companies will need to showcase ambition not just in expenditure but also in the magnitude of work they’re willing to undertake.

– Signature Bonus (50% weightage): A minimum of US$20 million for deep water blocks and US$10 million for shallow water blocks.

Thus, the minimum upfront expenditure commitment, inclusive of the signature bonus, amounts to US$310 million for deep water blocks and US$105 million for shallow water blocks.

Additional costs to consider

While these aren’t biddable items, companies should be cognisant of the requirement for acreage holders to pay:

– Training fee: US$1 million annually throughout the agreement period.

– Rental fee: Another annual payment of US$1 million.

Guyana’s inaugural offshore licensing round presents a layered and structured approach, finding common ground between its development ambitions and the world’s thirst for high-quality low-carbon barrels.