Guyana’s first offshore bid round has been launched and as oil majors set their sights on the prime blocks up for grabs, Guyanese companies have been encouraged to team up and also, cash in on the action.
But there are a few potential stumbling blocks that may prevent that from happening, unless local companies form key joint ventures.
A Guyanese investor cannot simply start a company today and decide to bid for an oil block. There are requirements for technical and financial competence that require experience in the sector, in most regards, and this would most likely preclude Guyanese businesses from bidding in all avenues but one – non-operating participation in a shallow water block.
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Here are the facts
According to the Ministry of Natural Resources’ ‘Indicative Terms and Guidelines’ for the 2022 Licensing Round, three main qualification categories were outlined for eligibility to submit a tender for the deepwater category.
The first one is Technical Competence. Under this category, interested bidders must have at least 10 years of experience as an operator in deepwater or ultra-deepwater. They must also have a production of at least 200,000 barrels of oil per day (bpd) in deepwater. For non-operators, it is 30,000 bpd. Interested bidders must also have proven reserves of at least 200 million oil-equivalent barrels (MMboe) in their portfolios. For non-operator, they should have at least 20 MMboe. Additionally, bidders are required to provide technical competence in dealing with HPHT (high-pressure, high-temperature) wells.
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The second category is Financial Capacity. Under this category, bidders are required to present audited statements of the last five years; a current ratio more than or equal to 1.00 (current ratio = current assets / current liabilities) and debt to equity less than or equal to 50%. They must also present interest cover (operating profit / [interest paid – interest received]) more than or equal to 2.00. While companies will be required to submit financial results for 2017-2021, the financial results of 2020 will be considered as outliers due to the pandemic and will not negatively affect the financial qualification should the company meet the minimum requirements for the other four years.
Interested bidders must also provide proof of investments in deepwater over the last three years more than or equal to US$300 million. For non-operators, the figure is US$50 million.
The final criterion is Health, Safety and Environmental Records. For this, interested bidders would need to submit health, safety and environmental (HSE) policy statements, evidence of an HSE management system, ISO certificates and HSE records from the last three to five years.
For shallow water blocks, though the categories remain the same, the rules differ slightly.
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In the Technical Competence category, interested bidders are expected to have at least five years of experience as an operator in offshore blocks and production of at least 10,000 bpd offshore. For non-operators, only financial qualification is required. And the interested bidder must have proven reserves of at least 50 MMboe.
To show financial capacity, bidders must produce audited statements of the last five years; a current ratio more than or equal to 1.00; debt to equity less than or equal to 50% and interest cover more than or equal to 2.00. They must also provide proof of investments in deepwater over the last three years more than or equal to US$30 million. For non-operators, the figure is US$10 million.
The HSE category remains the same for shallow block bidders.
Because the shallow water blocks require only financial capacity, and not technical competence, for non-operators, local companies could meet the criteria.
