Guyana Vice President, Dr. Bharrat Jagdeo, said that if Repsol’s request to renew its license for the Kanuku Block is approved, the firm would be navigating a new terrain of increased government take, an obligatory signing bonus, and reduced block acreage.
For a decade, Repsol has been operating the block. With US$500 million spent so far, encompassing activities ranging from drilling three wells to securing 3D seismic data for the entire block, Repsol is determined to continue with the knowledge it has gathered.
“[The application letter] came in since May of this year, and that letter sought not to relinquish as many thought, but to request a renewal of the block,” Jagdeo stated.
The 10-year license for Repsol’s operations was set to expire in May. However, a provision in the law allows the company to hold on to the block, pending determination of its application for renewal.
If the government approves Repsol’s request, it would not be business as usual for the Spanish explorer. The Vice President delineated the altered landscape Repsol would operate in:
1. Signing Bonus: The government will require an upfront financial deposit from Repsol.
2. Higher Government Take: The new terms from Guyana’s new model petroleum agreements, ensure an enhanced government take in the form of increased royalties, and taxes.
3. Reduced Block Size: The acreage for Repsol’s operations would see a contraction, to a size consistent with Guyana’s oil law.
Under the spent license, Repsol holds the operatorship of the Kanuku block with a 37.5% working interest. Tullow holds 37.5% with TotalEnergies/Qatar Petroleum (TOQAP) holding 25%. Jagdeo said the same consortium would return, should the government decide in favour of the application.
Explaining a key consideration for the government, Jagdeo said, “There’s a counterargument that if we go on the negotiated route… to renew the prospecting license, they’d also have to have a very aggressive development plan. That’s part of the competition [of a tender process], to have an aggressive… exploration plan.”
For Repsol, the stakes transcend beyond the block. Their US$500 million investment hangs in the balance. If the renewal isn’t sanctioned, the company stands to lose every penny, given they haven’t transitioned to production. If they make a discovery and move to produce, they will recover the costs.