No fewer than 10 companies will participate in the first bidding round for oil exploration in Guyana, as focus grows on the South American country’s potential to diversify oil supplies away from Russia.
Guyana offers 14 offshore blocks in this round of bidding; In order to accelerate the country’s economic development, and reduce the dominance of an ExxonMobil-led coalition over its oil sector.
The tender date was set for April 14, according to information seen by the specialized energy platform, quoting Reuters.
Guyana is estimated to have as much as 25 billion barrels of oil and gas off its coast, and a consortium of Americas ExxonMobil, Hess and China’s SinoC runs the massive Stabroek block, with more than 30 discoveries to date.
Guyana oil exploration tour
The government said companies interested in the Guyana oil exploration tour paid for seismic data to assess the blocks and decide whether to bid.
Energy Minister Vikram Bharat explained that there are 6 major international producers among these companies.
ExxonMobil, Qatar Energy, Shell, Chevron and Petrobras are among the oil giants who paid $20,000 to get a copy of geological information available on 11 blocks in shallow water and 3 blocks in deep water, Reuters reported.
None of the companies have made a decision on the bids while they wait for the government to issue terms of the contract, according to Reuters, citing people familiar with the matter.
Chevron focuses mainly on accessing geological data for Guyana, as it owns blocks in neighboring Suriname and Venezuela.
Exxon and Qatar Energy said they were awaiting full contract terms to consider submitting an offer.
Support for oil exploration in Guyana
In this context, Guyana Vice President Bharat Jagdeo is scheduled to speak at the CERA Energy Week conference in Houston today (March 6, 2023), to drum up support for the country’s first competitive bidding round.
“We see this as big and transformative for our people, we’re in a hurry to get this done before carbon neutrality comes along,” he said, referring to the goal of significantly reducing fossil fuel use by 2050.
Jagdeo plans to meet US government officials, international oil companies and government officials while he is in Houston.
Guyana has also begun direct negotiations over the 14 blocks and other areas, with governments that have state-controlled oil companies.
Guyana could also take back up to 20% of ExxonMobil’s Stabroek block and rebid in the future. Because the company did not develop the Pluma discovery, which was announced in 2018.
The following chart – prepared by the Energy Research Unit – shows oil production in Guyana since 2019:
Conditions for Sharing Oil Production in Guyana
Guyana plans to issue a new form of production sharing agreement for leasing offshore blocks by the end of March, after a delay of several weeks.
The proposed rules would nearly double what the government gets from oil production to 27.5% of royalties and profits, plus a new 10% corporate tax, compared to ExxonMobil’s main contract.
Vice President Bharat Jagdeo said the new production sharing agreement would also require producers to provide more information to Guyana.
He also made it clear that the new agreement will require details of production costs deducted by companies before dividing oil revenues with the state.
ExxonMobil can use 75% of oil production to offset a variety of costs, including building its new headquarters in Guyana.
The oil model would also set tougher bidding and procurement requirements, covering everything from production vessels to drilling suppliers.
However, the terms will not affect ExxonMobil’s Stabroek block; “We’re not renegotiating Stabroek, we don’t want to lose momentum,” Jagdio said.
Gas development in Guyana
In just a few short years, Guyana has emerged as an oil powerhouse with more than 11 billion barrels of recoverable oil and gas found by a consortium led by ExxonMobil.
Guyana does not use Exxon’s gas production in the huge Stabroek block, nor sell it abroad; ExxonMobil is currently re-injecting gas to maintain the pressure of the producing oil wells.
However, Vice President Bharat Jagdeo confirmed that the government sees gas as a way to change the country, which has a population of only 800,000 people.
He said – in statements to Reuters -: “We believe that gas must be converted into cash.”
He stressed that the government expects to receive this year (2023) a plan it had requested from Exxon Mobil to develop the company’s gas discoveries.
He said that the state is discussing with technicians and consultants a national strategy to supply gas to industries ranging from petrochemicals to liquefied gas that can be exported.
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