By the third quarter of 2022, the Government of Guyana is looking to auction some of its prime oil blocks to international oil companies (IOC). Announcing this news was the country’s Vice President Dr. Bharrat Jagdeo when he addressed the media on Monday afternoon.
The VP pointed out that in order to successfully auction off these blocks, the government first has to “aggressively enforce” the relinquishment provisions in the oil contracts. For context, relinquishment sees the contractor surrendering to the State all or part of the block they have been operating on, but only after the first, second and third renewal periods of its contract have expired.
“This is critical for us,” Dr. Jagdeo said while adding, “We have been caught up with trying to put in place the architecture for the management of the industry, but we need to move now to the next stage, which is the enforcement of the relinquishment provision and then auctioning.”
On the road to the auctioning of these blocks, Dr. Jagdeo emphasized the need for certain policy decisions to be made. He said these relate to the importance of identifying the model of auctioning and the significance of a robust legal framework to guide this process. “We would also have to get somebody in who has done auctions before; we’d have to get technical help,” he noted.
As it relates to the method identified for the auctioning, the VP pitched the practice of Suriname — a country that conducts its own 3D seismic surveys and auctions the blocks based on the data gathered. This data gives the government the power and benefit of demanding higher bidding prices from interested international oil companies.
Whether Guyanese authorities preclude current oil block holders from being a part of the bidding process will also be a topic up for decision going forward.
“If there are laws to be amended to make this happen then definitely. We would have to look at the framework for looking at the auction too,” Mr. Jagdeo assured.
In light of the relinquishment provisions governing the Stabroek and Kaieteur Block Agreements, ExxonMobil is poised to relinquish more than 20 percent of both concessions in the near future. In 2019, the oil giant returned 20 percent of the Canje Block to the State.
The U.S. oil major has found approximately 10 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 higher revenues.