In a recent clarification, Guyana Vice President Bharrat Jagdeo said no decision has yet been made regarding Repsol’s request for a new license for the Kanuku Block. He said some media reports appear to have misinterpreted his previous comments on the matter to mean that the government was inclined to approve the Repsol’s application.
As of now, the Kanuku Block is back in the hands of the Guyana government since the previous prospecting license has expired. “If we exercise that option and no decision has been made to work back with them for the same area, it will not be a renewed license, but a new license,” Jagdeo stated.
This distinction is critical when it comes to the question of the recoverability of costs. Jagdeo had said Repsol claimed US$500 million was spent to meet obligations under the expired license. A local news report had said that Repsol could reclaim funds spent under its old license if it moves to production under the new license. Jagdeo made it clear he did not say that, and that the government would not allow costs to be brought forward from the oil license.
“… Should they move to production under a new license, only exploration costs in the current period under the new license will be considered as part of the cost bank,” he stated.
Jagdeo said he only mentioned the amount they have already invested, to make a point about risk. “[It] was for the benefit of people… who keep saying and behaving as though this is a risk-free environment,” Jagdeo stated.
Having operated the block for a decade, Repsol is keen on continuing its operations. The application for license renewal came in May this year. If Repsol’s request is approved, they would be required to pay a signing bonus, operate under the new model petroleum agreement terms, and operate a reduced-size block.
Under the expired license, Repsol held a 37.5% working interest in the Kanuku block. The same consortium, which includes Tullow with 37.5% and TotalEnergies/Qatar Petroleum (TOQAP) with 25%, is expected to return if the renewal is approved.
