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.
