Guyana says open to changing non-fiscal terms for oil contracts

Frontera Energy

23/02/2024 19:00

By Kiana Wilburg
       GEORGETOWN, Feb 23 (Reuters) - Guyana is open to
changing its oil-contract terms to secure  investment in the
country, but will not alter the royalties or other fiscal terms,
Vice President Bharrat Jagdeo said at the conclusion of a
four-day energy conference.
    The South American nation has become the fastest-growing oil
producing country, with about 650,000 barrels per day (bpd) up
from zero five years ago. Last year, it unveiled a new oil
production sharing agreement model in the hopes of increasing
its share of oil wealth and attracting new producers.
    Results of its first competitive bidding round for oil
blocks will be announced in coming weeks, an official said this
week. Guyana could allocate up to eight areas to several
consortia, including an Exxon Mobil  XOM.N -led group that is
responsible for all the nation's output today.
    The new production sharing agreement (PSA) includes a 10%
royalty, up from 2% paid by the Exxon group, a lowering of
cost-recovery share for producers, and a new corporate tax.  
    "We had to ensure that we, having such a fiscal model,
remain globally competitive," he said in a media briefing late
on Thursday, adding that some oil firms had paused investment in
exploration when the auction was launched in 2023.
    The government in 2022 eased the proposed terms of local
rules that required the use local workers, a provision companies
had anticipated would be too tough to meet, saying there were
insufficient qualified workers and local contractors. 
    
    'TOO TOUGH' CONDITIONS 
    "We don't want, because of the non-fiscal terms, to kill
interest," he said. There were several areas of the terms that
bidders raised objections to, he said, without providing
details. Some of "the conditions were too tough," he added. 
    The changes could be applied before the next bidding round,
which will likely be launched later this year and will include
up to 20% of the Exxon-group's prolific Stabroek block, which
must be relinquished by October.
    A separate drilling consortium by Toronto-listed Frontera
Energy  FEC.TO  and CGX Energy  OYL.V  that could be the next
oil producer in Guyana, is looking for a financial partner,
which according to analysts could take time to find support,
further adding complications to the development plans.
    The firms have given the government assurances that they are
going to secure partners, Jagdeo said. 
    "They have obligations, according to the prospecting
licenses they have, and they have to meet those obligations. I
don't know whether the new fiscal regime or the new PSA is a
deterrent to them securing partners as yet," he said.
    Talks with the Exxon group on its seventh project in the
country, which could include a liquefied natural gas (LNG)
development, have not started as discussions on the sixth
project are ongoing. Government approval for the sixth project
could be issued by the end of the first quarter, he said.
    Guyana has hired S&P Global energy consultancy IHS to help
devise a strategy to develop its offshore natural gas reserves.
Those deposits are central to developing a second energy sector
that would include power plants, gas-processing and
petrochemical projects.
    "We are looking to monetize the gas," Jagdeo said, adding
"we want all the gas to come onshore for industrialization." 
    However, given the country's lack of infrastructure and a
rising global demand, the feasibility study might say that
Guyana will only be able to bring a portion of the gas to shore
for domestic use and to export to neighbors Brazil or Suriname,
and process another portion offshore for exports.
    

 (Reporting by Kiana Wilburg, writing by Marianna Parraga;
Editing by Gary McWilliams and Aurora Ellis)
 ((marianna.parraga@thomsonreuters.com; +1 713 371 7559; Reuters
Messaging: @mariannaparraga))