Page 4 - LatAmOil Week 12 2023

LatAmOil COMMENTARY LatAmOil

Guyana goes public with

new model contracts

Ministry of Natural Resources talks about unitisation and gas utilisation as

well as financial terms of deals for blocks included in offshore licensing round

THE oil industry is under no small amount 14 blocks included in the auctions. It stressed
of scrutiny in Guyana. Of course, some of the that the final terms of the model contract were
WHAT: scrutiny is coming from environmental groups still under discussion but stated that George-
Guyana has disclosed the that would prefer to see fossil fuel consumption town had decided to hike royalty rates from 2%
terms of its new model halted or at least minimised. But it remains to 10%, introduce a 10% corporate tax, reduce
contracts, which are intense, even among advocates of hydrocarbon cost recovery ceilings from 75% to 65% and keep
more favourable for the development. the existing 50:50 split in profit-sharing between
government than Exxon- Some of the attention is positive because of the government and licence holders in place.
Mobil’s Stabroek deal.
the sector’s potential to attract many billions of Altogether, the ministry said in a statement
WHY: dollars in investment and facilitate economic in November, these changes should serve to
The country has been un- growth, especially now that ExxonMobil (US) raise the government’s share of the proceeds of
der pressure from critics has started crude production at two sites and is oil contracts from 14.5% to 27.5%, a nearly two-
who fear that it will ask working to bring additional fields on stream at fold increase.
for too little from IOCs. the Stabroek block. But some of it is negative,
driven by the suspicion that ExxonMobil and its Unitisation options
WHAT NEXT: partners are holding back – that the contract for According to press reports, the ministry has
Georgetown is driving a Stabroek is so favourable to the wealthy interna- been working to finalise the new model con-
harder bargain than it tional oil companies (IOCs) that Guyana must tracts and released the finished versions at last
did before oil production have been cheated. earlier this week. It does not appear to have
started, but it has yet to Guyana’s government pushed back against made any changes to the financial measures
start the next round of the critics, joining ExxonMobil in pointing out announced last autumn, but it has signaled that
exploration. that the terms of the Stabroek contract were in it wants to assert its authority over investors in
line with those that might be offered to an IOC certain ways.
that was involved in opening up a frontier prov- It has said, for example, that the new con-
ince. Since the US giant was assuming all the tracts will include unitisation provisions. That
risks (and upfront costs) of exploring a new and is, they require investors to notify the Ministry
untried basin, they argued, it was justified in tak- of Natural Resources within 60 days in the event
ing a sizeable share of the rewards. that new commercial discoveries extend beyond
As such, Guyana’s government has been the set boundaries of a designated licence area.
under a certain amount of pressure to make clear Investors must also submit unitisation plans
that the state’s share of the rewards would be to the ministry or agree to surrender the assets
larger the second time around. That is, George- in question. That is, they must prepare to work
town wants to make clear that it is no longer with investors in the relevant neighbouring
willing to work with the IOCs that attempt to blocks to combine forces – or, if relevant, they
follow ExxonMobil into the Guyana-Suriname must seek permission to incorporate portions
basin on the same terms. Now that the basin is of unassigned neighbouring blocks – so that
known to contain substantial amounts of oil, fields can be developed all at once rather than
investors will have to pay more to access explo- piecemeal.
ration opportunities – and more to gain and In its statement announcing the release of
retain development rights. the new model contracts, the ministry said
these provisions would apply not just to all 14
Financial details of the blocks included in the offshore licensing
Officials in Georgetown began unveiling details round but to all existing offshore deals except for
of these plans last year. Stabroek.
When the Ministry of Natural Resources This may indicate that Georgetown is ready
announced the opening of the country’s first to consider unitisation deals involving existing
competitive offshore licensing round last contracts and new contracts signed as a result of
November, it noted that the government was the bidding rounds, even if the existing contracts
working to draw up a new contract form for the make no provisions for this.

P4 www. NEWSBASE .com Week 12 22•March•2023