14 oil blocks to be auctioned as royalty & corporation tax set at 10% – VP

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Vice President Dr Bharrat Jagdeo

Vice President Dr Bharrat Jagdeo today announced that the government has decided to auction 14 blocks that range from 1000sqkm to 3000sqkm per block, with the majority being closer to 2000sqkm.

During a press conference, he revealed that 11 will be in shallow areas while three in deep areas.

The Vice President also said there will be a minimum signature bonus of US$20M per block in the deep areas and US$10M for shallow areas. “We’re not restricting how many blocks you will bid for but we’ve decided to limit the award [at] three [for any company],” Jagdeo said.

“Each bidder will be required to put up a work programme,” he added.

Dr Jagdeo also disclosed that government has settled on a new fiscal regime which will now govern not only the contracts that will be signed with the successful bidders but will govern all of the subsequent Production Sharing Agreements (PSAs) that will be signed for any other exploration that is already taking place.

In this regard, he said the 50/50 profit sharing formula will be retained while royalty will go to 10% and corporation tax, also 10%.

He also noted that the maximum for any given year for cost oil will be 65%.

The Vice President also noted that there will be more stringent relinquishment clauses.

Jagdeo said the bid round will be launched soon and will likely last for about five months.

During a recent visit to Guyana, Norwegian consultancy Rystad Energy Vice President Shreiner Parker noted that while Guyana will get interests from around the globe when it goes out to auction its oil blocks, getting the financial terms of the blocks right would be very important. He had given the example of Brazil.

“In recent years, they’ve had unsuccessful bid rounds. Even though Brazil is an extremely important source of offshore production globally, they were unable to attract the interest that it wanted, because the fiscal regimes were too onerous. And they were asking for too much.”

“So, the balance that Guyana will have to strike on these new blocks is understanding that we’re no longer going to have the Stabroek fiscal regime. We are a petroleum province. Yet at the same time, we cannot expect that it’s a guaranteed success and that every hole poked into the ground will produce oil. So, getting that fiscal regime correct is going to be paramount to attracting interest globally,” Parker had said.