Guyana to rake in more ‘oil money’ from new oil blocks, local companies can explore for oil in first ever bid round slated for next year

Last Updated on Thursday, 3 November 2022, 17:34 by Denis Chabrol

Guyana is set to earn more money from the oil sector under a new Production Sharing Agreement (PSA) that would govern production from oil blocks, as the country prepares for its first ever bid round early next year for 14 offshore blocks, Vice President Bharrat Jagdeo said Wednesday.

Mr Jagdeo also announced that Guyanese companies would be entitled to bid for any of the 11 oil blocks in shallow waters. The three others are in deep and ultra deep waters. “We decided that to get the bids more competitive, we will allow locals and international companies to bid so there will be minimum technical and financial qualifications for the bids,” he said. He explained that the qualifications would be more stringent for the ultra-deep areas because only few companies can operate there.

He warned that under the new rules companies that fail to forge ahead with their work programmes within the first three years would have to return their blocks and pay the Guyana government the estimated 20 percent of their seismic work that would have to be stated in their work programmes. Mr Jagdeo said government could no longer tolerate losing money on oil exploration concessions where companies do little or no work for many years. “This is to prevent people taking a block and sitting on it for three years and then at the end of the three years, you hear ‘we can’t do anything, we need to move forward’ and the country loses three years of development,” he added.

Under the new PSA that would also include new exploration in existing concessions, the Vice President said profit oil would be increased from 25 percent to a maximum of 35 percent, royalty would be hiked from 2 percent to 10 percent and there would be a 10 percent corporate tax. The profit oil is split 50 percent between the producer and the Guyana government so under the new PSA, Guyana’s profit oil would move from 12.5 percent +2 percent royalty to 17.5 percent +10 percent royalty. Cost oil would be reduced from 75 percent to 65 percent.
“The laws of the country will be amended to reflect these new fiscal terms but the strengthening will entail the entire PSA,” he said.  

He said Guyana opted for a simple system of fixed royalty that is easier to manage and protects Guyana if the oil price slumps, based on advice by the London headquartered market intelligence company, IHS Markit.

The Vice President said Guyana stands to earn a minimum US$20 million signing bonus per block in the ultra deep area and US$10 million for shallow areas if companies win a bid for any of the new oil blocks located in Oreo and Demerara. The size of the 14 blocks – 11 in shallow waters and three in deep and ultra deep waters- would range from 1,000 square kilometres to 3,000 square kilometers with most of them being almost 2,000 square kilometres.

Vice President Bharrat Jagdeo told a news conference that 14 blocks would be auctioned ranging from 1,000 sq km to 3,000 sq km with the majority closer to 2,000 sq km. He said 11 of them would be in shallow waters and three in deep waters.

While government was not ready to talk about government-to-government exploration of oil blocks in Guyana, Mr Jagdeo noted that Trinidad and Tobago, and Qatar have expressed interest in that regard.

He said all of the prospective bidders would have access to the data room that contains 2D and 3D seismic data before they tender for a block. He said a company would not be able to get more than three blocks and they would have t0 list them in order of preference.

The Vice President said the industry was very competitive with 65 countries in or are about to get into bid rounds.