Page 6 - LatAmOil Week 27

LatAmOil COMMENTARY LatAmOil
 Despite these de ciencies, “they were handed the blocks without any public auction, with- out parliamentary oversight, as the house was dissolved to facilitate general elections,” he remarked. “ ere were no consultations with the opposition. There was also no signing bonus.”
Accordingly, Retemeyer said, the agency is keen to learn whether the award contravened Guyanese law or involved any corruption. Spe- ci cally, he said, it wants to know who bene ted from gaining access to two sites lying adjacent to Stabroek, an o shore block where the US giant ExxonMobil has discovered almost 7 bil- lion barrels of crude oil.
It also wants to know why the awards were made just a few days a er ExxonMobil unveiled its findings at Stabroek and just a few days before the Guyanese presidential elections. Additionally, it hopes to determine whether the fact that ExxonMobil has now joined in the project by acquiring stakes in the Kaieteur and Canje elds has any signi cance.
Criticism of ExxonMobil
Retermeyer took pains to say last week that the current probe was not targeting ExxonMobil in any way. “We are not investigating [the US com- pany],” he was quoted as saying by the Associ- ated Press.
Even so, it is worth noting that ExxonMo- bil has also drawn its share of criticism with respect to signing bonuses. Guyanese o cials and other observers have complained that the $18mn sum that the US company paid when it signed its contract for Stabroek is too low. ey have also criticised the government’s decision to set royalty rates for the project at 2%, far below the rates of 5% or more prevailing in other oil and gas provinces.
Former Natural Resources Minister Raph- ael Trotman has sought to defend the deal. He asserted in early 2018, prior to his departure
from office, that Guyana had secured “the best arrangement it could get in those circum- stances,” according to a report from Demerar- aWaves.com. Additionally, he pointed to the provisions of the contract that gave the country a 50% share of pro ts, saying this was “not an ungenerous amount.”
Changes in the pipeline
Yet Trotman’s words do not indicate that Georgetown is willing to accept the same sort of terms going forward.
In late May, Guyana signed a contract with Canada’s Frontera for a stake in two o - shore blocks – Demerara and Corentyne, both of which both lie adjacent to ExxonMobil’s Stabroek block. Neither site contains proven oil deposits, but Frontera paid a signing bonus of $33.33mn for its 33.33% stakes in them. Its willingness to do so has encouraged critics to demand more in the future.
Guyana’s government may make other pol- icy changes as well. An International Monetary Fund (IMF) mission that visited Guyana last month have urged Georgetown to tighten up the legal regime governing Stabroek and other elds being developed under production-shar- ing agreements (PSAs). e IMF team was par- ticularly concerned about the PSA law’s failure to include “ring-fence” provisions that locked in tax rates and other conditions, saying it might have a negative impact on the amount of reve- nue owing into government co ers, according to Stabroek News.
It is not yet clear whether the Guyanese government intends to follow the IMF’s rec- ommendations on this front. If it does, the for- eign investors that have been eyeing the South American country’s o shore elds would have to pay more to develop their assets. But even if it doesn’t, o cials in Georgetown will be looking more closely the next time they have to negoti- ate signing bonuses and royalties. ™
Of cials in “ Georgetown will
be looking more closely the next time they have to negotiate signing bonuses and royalties
MEXICO
Eni achieves first oil
at Area 1 offshore Mexico
ITALY’S Eni has begun extracting oil from Miz- ton, an o shore eld in Campeche Bay. First oil is now owing from Mizton-2, a well that has “shown a very good productivity index,” the Italian company said in a statement dated July 2.
Eni described this development as the “early production phase” of work at Mizton, which lies within a contract area known as Block 1. Output levels are set to go up to 15,000 barrels per day (bpd) during this phase, it said in its statement.
e Italian company is pumping production from the eld up to the Mizton platform, which lies in seas 34 metres deep. It then transfers the
load to a multi-phase underwater pipeline for delivery to its onshore receiving facility (ORF), located in Sanchez Magellanes, a city in Tabasco State. At the ORF, the barrels are separated and then sent to a treatment plant in San Ramon owned by Pemex, Mexico’s national oil com- pany (NOC).
Early production operations are likely to con- tinue for about a year and a half, as Eni intends to move into full eld production in early 2021. During this phase, the Italian company will use a oating production, storage and o oading (FPSO) facility to support operations at Mizton.
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w w w . N E W S B A S E . c o m Week 27 10•July•2019