Guyana in 'no rush' to draft new oil production-sharing pact -minister

Frontera Energy

06/05/2022 17:11

By Marianna Parraga
    HOUSTON, May 6 (Reuters) - Guyana is in "no rush" to draft a
new production sharing agreement (PSA) for offshore oil
development, its Natural Resources minister told Reuters,
reversing a year-long drive to devise new rules for future
output.    
    The government of South America's newest crude oil producer
said in 2021 it was planning a new agreement to revamp terms and
boost royalties for future oil and gas projects. The proposed
document was expected to improve terms for Guyana of a 2016
contract with Exxon Mobil  XOM.N  and its partners for the
prolific Stabroek block.
    But the tiny nation, which has become one of the most
desired exploration hot spots with the discovery of about 11
billion barrels of oil and gas, has struggled to quickly advance
legal and regulatory frameworks for its energy industry. The
original PSA reached with Exxon has been criticized even by the
current government for being too favorable to oil producers.
    Guyana aims to prioritize creation of an oil and gas
regulatory body, Minister Vickram Bharrat said this week on the
sidelines of the Offshore Technology Conference in Houston.
    "We have started some of the work on designing a model PSA
according to internationally accepted standards," he said.
"However, there is no rush to conclude it immediately because we
don't see any other companies applying for a PSA just yet."
    Companies currently exploring in Guyana have in recent years
signed or extended licenses to complete drilling. The new PSA
would be needed to move projects to the development phase. 
    
    OFFSHORE DISCOVERY
    In January, a joint venture by Canada-based CGX Energy
 OYL.V  and Frontera Energy  FEC.TO  made one of the country's
most recent offshore discoveries. The venture will focus
drilling this year on the Corentyne block, the most promising of
its three blocks, including Demerara and Berbice. 
    Frontera told Reuters in March the venture was in talks with
the Guyanese government about what do with Demerara, while
preparing drilling at the Wei-1 exploration well in Corentyne in
the second half of 2022, but declined to provide more details. 
    "This is only the second well for CGX, so I would say, in my
own estimation, that in about three years from now, once
everything goes well in terms of exploration, we might be ready
to deal with CGX to sign a PSA," the minister said.
    Between 2019 and 2020, a group led by Tullow Oil  TLW.L  and
Repsol  REP.MC  also announced discoveries at the Orinduik and
Kanuku blocks off Guyana's coast.
    But shortly after Tullow said it would limit capital
exposure in Guyana, possibly selling a portion of its stake to
another company. So far that has not happened.    
    
    
    SEEKING 'THE IDEAL PARTNER' 
    According to Bharrat, the process for drafting a new PSA
model will be similar to the mechanism for approving Guyana's
local content policy. A high-level panel will be nominated for
the task and domestic and foreign consultants will be involved.
    In the meantime, the government plans to have ready this
year an energy regulatory agency and probably a state oil
company that could offer partnerships in exploration areas
returned by other firms or for new blocks yet to be put on the
table.
    In Guyana's to-do list there is also a competitive tender to
select the company that will market its share of oil, once a
contract with a unit of Saudi Aramco expires in September.
    "We are looking for long-term arrangements, for the ideal
partner for marketing and getting better benefits," Bharrat
said, adding the nation aims to save as much as possible on
trading fees.
    Indian state refiners that have shown interest in a
government-to-government agreement to buy Guyanese oil after
testing the Liza sweet light crude last year, would also have to
participate in the tender, the minister said.

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GRAPHIC-Guyana's oil and gas blocks    https://graphics.reuters.com/GUYANA-OIL/CONTRACTS/myvmnywjnpr/
Guyana's oil, and gas blocks    https://tmsnrt.rs/3FkTihs
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 (Reporting by Marianna Parraga and Sabrina Valle; Editing by
David Gregorio)
 ((marianna.parraga@thomsonreuters.com; +1 713 371 7559; Reuters
Messaging: @mariannaparraga))