Energy Department Director, Dr. Mark Bynoe assured members of the media this morning that there is nothing nefarious taking place in the “face-to-face” bidding process that has been initiated for the first three cargoes of Guyana’s entitlement from the Stabroek Block.
His comments in this regard came on the heels of a Bloomberg report which revealed last week that Guyana is expected to receive bids for its oil from at least half a dozen traders from Houston, Geneva and London.
The companies invited for this exercise include ExxonMobil, Hess, CNOOC/NEXEN, BP, Chevron, Shell, Total, and ENI.
It was also revealed that letters were sent to the refiners around the globe inviting them to bid “face-to-face” for three million barrels of light-sweet oil. But Bloomberg said that this was not the only unusual aspect of Guyana’s approach. It further stated that the buyer of Guyana’s sweet crude must take the “unusual role” of handling “all operating and back office responsibilities” related to exporting the crude.
At the press conference held at its new office at Lot 43 Brickdam, Dr. Bynoe stressed that all decisions on the said matter were made after careful advice was received from experts as well as the Public Procurement Commission.
The Energy Director reminded that a two phased approach is being taken for marketing the first three lifts of Guyana’s crude. In the first phase, the Department said that the companies will provide proposals for purchase and the best one will be chosen. In the second phase which gets underway next year, the Department said a public request for proposals (RFP), for marketing services for Guyana’s crude would be issued. This could take about three months to finalize.
Dr. Bynoe said that in the short term, and beginning this week, the focus will be on setting national benchmarks for Guyana’s crude.
He said that the criteria for selection of the companies included having international oil companies with a global refining footprint as well as an integrated oil value chain. The invited companies were also expected to be in a position to support all operating procedures for the three cargoes. Further, given Guyana’s inexperience and impending early dates for the lift next year, Dr. Bynoe said that the introductory phase was considered more advantageous to Guyana at this time.
During the question and answer segment, Crude Marketing Specialist, Ms. Virginia Markouizou of RPS Group further explained the reasoning behind the use of an introductory phase.
Markouizou noted that the companies which were invited to put forward proposals have vast experience, are known to the market and are very much aware of the intricacies of introducing a new grade into the market.
She added, “They have done this many times in the past in supporting governments all around the world. They are all very reputable companies, they are listed companies with shareholders who hold them accountable for their actions and the most important thing; they can help us introduce the grade into the market in a very standard way. This is what we are trying to achieve here because volatility for the Guyana Liza grade is not good.”
The Crude Marketing Specialist said that the aim is to create an environment where there is standardization and stabilization which can take up to six months but will be shortened to just three in Guyana’s case.
When challenged to say why this was not revealed to the nation before, Dr. Bynoe said that it would not have been wise to do so. He said that the Bloomberg article was from a leak of information. He said it was the intention of the government to inform the nation when there were conclusions on these matters.
Dr. Bynoe said, “…We were aiming to come to you when the matter was concluded and not during because it can weaken the government’s negotiating position. It does not help to negotiate in the media. I was hoping to have a wrap up to say this is what was done. It is not government’s intent to keep things under wraps.”
Further to this, it was noted by the Crude Marketing Specialist that while the face-to face bidding was deemed unusual by Bloomberg, going the route of phone calls and instant messaging would not be ideal.
She said, “Trading of this commodity is a very global, transparent process and an in the minute business. It happens in front of screens and happens through phones…If you were introducing the fourth or fifth grade of the Guyana crude then a telephone conversation would have been sufficient but this is about establishing relationships with the market, showing a face of stability.”
The Specialist added, “…This is not just about price negotiation. We are aiming for feedback regarding quality of crude and that is not a phone conversation…”
The Guyana Standard understands that the negotiation process with the oil companies will conclude this week and the Energy Department will update the nation on decisions taken when necessary.
In the interim, Dr. Bynoe assured that “no side deals taking place and nothing nefarious is going on…”