French firm Total E&P Activities Petrolieres is the latest foreign oil company to convert its interest in Guyana’s blooming oil resources into action. The company has signed an agreement with a shareholder in Guyana’s Orinduik Block that is likely to see it establishing a foothold locally.
Orinduik Block, which is just a few kilometres from Exxon’s discoveries in the Liza and Payara fields, has the potential to produce as much as 1.8 billion barrels of oil. A recent seismic survey was commissioned by majority shareholder Tullow and Eco Atlantic.
The A Partnership for National Unity/Alliance For Change (APNU/AFC) Government in fact handed out petroleum blocks to operators Tullow and Eco when it took office.
That Petroleum Prospecting Licence and Production Sharing Agreement with the joint venture team of Tullow Guyana BV and Eco (Atlantic) Guyana Inc for a concession of 1801 square kilometres in the Orinduik Block offshore Guyana which was issued in January 2016.
However, months later, Eco sold 25 per cent of its 40 per cent shares.
According to Eco Atlantic (Guyana) on Tuesday, the French company signed an option agreement that allows it to buy a 25 per cent working interest. This would make Total a major player in the Block, as Tullow owns 60 per cent and Eco, 40.
“Pursuant to the Option Agreement, Total will make an immediate payment of US$1 million for the option at its sole discretion, to Farm-in to the Orinduik Block for an additional payment in cash of US$12.5 million to earn the 25 per cent Working Interest,” the company said on Tuesday.
The exercise of the option must be made within 120 days of completion of processing of the 3D seismic survey, the company said, adding that the Seismic Data Report was completed on September 5 and processing is expected to take two to three months. It also noted that the option fee is repayable in the unlikely event that the Seismic Data Report is not provided to Total by June 1, 2019.
According to Eco, once the transaction has been completed and has received all regulatory approvals, Total will be a 25 per cent shareholder in the enterprise, while Eco will have reduced its standing to 15 per cent. Tullow, the operator, will retain its 60 per cent share.
“In the event that the option is exercised, each party will pay its pro-rata working interest from that date forward. With exploratory wells offshore Guyana expected to cost circa US$35 million, Eco’s participating interest is anticipated to be approximately US$5.25 million per well.”
“It is, therefore, projected that this transaction, if fully executed, will thus provide adequate funding to meet Eco’s share of the costs to drill at least two wells on the Orinduik Block as well as recover the costs of the expanded 3D seismic survey.”
In a statement on the deal, Eco Atlantic President and Chief Executive Officer (CEO) Gil Holzman stated that the deal validated both the potential of the Orinduik Block, but it also validated Eco’s long-term strategy – to identify highly likely prospect assets, arrange favourable Petroleum Agreement terms and partner with world-class companies.
“In the event that the option is exercised by Total, the deal proceeds will recoup all our expenses on the expanded 3D programme and fund us for drilling a minimum of two wells based on current well costs,” Holzman said.
“We have approximately US$4 million in cash currently and once the option is exercised, Eco will be in a very strong position to be fully funded through the next few years which is expected to include several drill programmes. This deal is also expected to introduce into Guyana yet another significant global player and we look forward to working with Total (and) Tullow in the years to come.”
The lesser known Orinduik oil block has been under the administration of Eco Guyana and Tullow, after they signed a 10-year Petroleum Prospecting Licence and Production Sharing Agreement with Government last year.