Vice President, Dr. Bharrat Jagdeo revealed on Thursday that Guyana’s first oil blocks auction will see 11 shallow water blocks featuring alongside three deepwater blocks in Area C.
Jagdeo said these blocks range from about 1000 square kilometers to 3000 square kilometersm with the majority of them being close to 2000 square kilometers.
During a press conference at the Office of the President, Jagdeo also outlined the new fiscal terms that will characterize future exploration and production agreements. He said they will include a 10 percent royalty, 50/50 sharing of profit oil, a 10 percent Corporation Tax, and a 65 percent cost recovery ceiling.
Importantly, the Vice President said the bids submitted by interested companies will be adjudged against each other for the expenditure set aside for their work programme. They will also compete against each other on signing bonuses. The minimum government will accept on shallow water concessions is US$10M while for deepwater concessions it is US$20M.
Jagdeo said companies will have about three years to complete seismic work on each block but failure to abide by this will result in a penalty. Companies will not only lose the block but they will also have to remit to the State, the money that was set aside for the seismic work.
The Vice President also shared that locals will have a chance to compete alongside foreign entities for the oil blocks. He was keen to note that there will be minimum technical and financial qualifications that have to be met. “We don’t want it to be too onerous. The qualifications will be more stringent for the ultra deep areas because only few companies can work there,” the Vice President said.
The former President too said there are no restrictions on how many blocks a company can bid for but three is the most one company can get.
He said these terms, among others, were had following work that was undertaken with several consultants. Jagdeo said IHS Markit, a leading information services provider headquartered in the UK is taking lead on guiding the government on the auction.
Jagdeo said HIS, a global powerhouse that monitors the pulse of the industry, was able to determine that Guyana is not the only country vying for the interest of investors via auctions. He said 65 countries in this 2022 period are either doing a bid round or launching one.
Even with such stiff competition, Jagdeo said he believes Guyana will succeed with the new fiscal formula.
The auction, scheduled to launch soon and will last for five months.
