Oil block deal signed with TotalEnergies-led group

-US$15m signing bonus in two weeks

The government yesterday signed its first petroleum exploration pact since taking office in 2020 as the consortium of TotalEnergies of France, QatarEnergy of Qatar and PETRONAS of Malaysia inked a contract for Shallow-Water Block S4 that would also see this country receiving a US$15 million signing bonus in the next two weeks under an amended Production Sharing Agreement (PSA).

The PSA signing for the approximately 1,788-square kilometre block located at some 50 to 100 kilometres offshore and in water depths ranging between 30 and 100 meters, took place yesterday at the Pegasus Cor-porate Suites, Kingston, Georgetown, with Minister of Natural Resources, Vickram Bharrat, signing on behalf of government.

It is the first major exploration deal signed by the People’s Progressive Party/Civic (PPP/C) government and had been pending for some time. The consortium informed that late next year, it would begin operations with an initial investment of US$20 million for 3D seismic survey works in the block.

TotalEnergies Vice Pre-sident of Exploration for Americas, Daniel Larrana-ga, explained that the co-venturers are TotalEnergies (operator) – 40% with QatarEnergy and PETRO-NAS each holding 30%.

Guyana’s Minister of Natural Resources thanked the three companies, acknowledging that they worked with government over a prolonged period to ensure that “we get it right.”

He continued, “For working through this process with the team so that we can have an ideal Petroleum Agreement that is acceptable by both parties and again that would bring benefits to Guyana and Guyanese. So, today is indeed a historic day for us and it is the first PSA that we are signing after the 2016 Stabroek PSA with improved conditions and improved fiscal terms.”

The 2016 PSA with ExxonMobil and partners has been widely lambasted but the government has refused to countenance its renegotiation.

Bharrat noted that the investment demonstrates continued international confidence by investors in Guyana’s licensing framework and reflects government’s commitment to ensuring that the development of this country’s natural resources “is done sustainably and for the benefit of all Guyanese.”

And as he boasted that the deposit of the US$15 million bonus will be made into the National Resource Fund within 15 days, Bharrat said that Guyanese will benefit from the monies and will see the transparency in how their money is used.

He lauded the steps taken by government to ensure a local content policy that insulates Guyanese from being sidelined from their own development because of a lack of experience. “Guyana is one of the few countries in the world, and we like to say this because it is a fact, one of the few countries in the world that has actually moved from a Local Content Policy to a Local Content legislation defying the odds of many,” he said.

“When they said that the Local Content legislation will close down the oil and gas sector in Guyana, will not attract the big players in the oil and gas sector, well today again we are defying that odds because we are attracting major players while at the same time rolling out benefits for Guyanese, and Guyanese businesses,” he added.

Expressing optimism, Larranaga was upbeat, stating that the company was pleased to return to the Guyana basin after 35 years, and will start works in late in the second half of next year.

“It’s about seismic acquisition, but as we progress to exploration, hopefully with discoveries to come, then you would have a large impact,” he said.

He also noted, “It has taken us 35 years to come back as operators in this basin. Exploration is about perseverance, it is about technical excellence, it is about strategic partnership, and we have all those elements here today in S4. We have had some experiences as non-operators in the Guyana basin since about 10 years ago, and we feel that it is the exact right moment, not only because of the geological potential of the basin, it is a prolific basin that we know well.

With Total also having operations in Suriname, the company plans to tap into resources it has there when it begins seismic surveys until there is a discovery when reevaluation will be done. “We have a high presence in Suriname so we will be synergising our operations from there at the beginning at least and as we progress and as we mature we will have more and more presence in-country.”

He assured that the consortium will adhere to the local content provisions of the contract and hire local contractors and hire local personnel whenever needed.

And where there are penalties in the PSA, he stressed that the co-venturers will not violate any aspect of their agreement, so they are not worried.

 Director of the Local Content Secretariat, Michael Munroe, had pointed out that the PSA sets out penalties. “We have a new fiscal package, as you would appreciate, previously, there was no imposition of taxation, and in this context we are now levying a 10% corporation tax, and there are also penalties for non-completion of the work programme. So, the government has taken a position that we want our participants in the basin, the new participants, to be

aggressive in terms of their work programme, and insofar as they are unable to complete the work programme, there will be a penalty.”

Guyana’s first-ever auction was initially unveiled on December 9, 2022 by President Irfaan Ali. After several extensions and updates to the fiscal framework, the auction concluded with six bidders submitting 14 offers for eight of the 14 oil blocks offshore Guyana. Yesterday’s was the first that was signed, nearly three years after the auction.

The government had said that its new PSA for companies in the 2022 Licensing Round was far superior to the 2016 PSA deal that ExxonMobil currently has. The royalty rate will be 10%, up from 2%, the cost recovery ceiling has been reduced from 75% to 65%, and a 10% corporate tax has been included. The profit share will remain 50% each.

This consortium had been the only one that had been given Cabinet’s green light to proceed to a contract.

Yesterday, the Ministry of Natural Resources reiterated the government’s commitment to ensuring that all petroleum operations are conducted with the highest levels of environmental stewardship, transparency, and local participation. “The ministry looks forward to collaborating closely with the consortium as Guyana continues to strengthen its position as a responsible and emerging energy producer,” it added.