…as Guyana’s 1st oil lift expected next week amid plunging prices
With Guyana’s first share of the oil expected to be lifted next week, the Department of Energy is mum on what price has been secured for the crude which will be sold to the Barbadian branch of Shell International.
This played out on Monday, when Department of Energy Director, Dr Mark Bynoe held a press conference. When asked by the media what price has been agreed on for the oil, Bynoe referred the media to the Guyana Extractive Industries Transparency Initiative.
“First of all, we cannot discuss prices here. As it is, we’ve been on record as indicating that we will be working with the EITI, which has specific guidelines on reporting on first trades. And that’s how the Department will ultimately conduct its business,” Bynoe informed the media.
Bynoe explained that EITI is being engaged when it comes to reporting on financial transactions in Guyana’s oil sector and they are committed to working with them. Guyana, he further explained, will get its first oil lift next week. Bynoe laid out the methodology for processing these funds.
“The Department has established a working relationship with the EITI and has committed to proving the GYEITI with all the data and information required by the EITI standard, with full observance of the laws of Guyana. We have committed to continuing our collaboration to ensure that compliance, transparency and accountability are resident within [Guyana’s] oil and gas sector,” Bynoe said.
“Guyana’s first lift of approximately one million barrels is scheduled for early next week. This will represent part of Guyana’s profit oil allocation of 12.5 per cent. Additionally, the country will be receiving its two per cent royalty on gross production of all oil produced. Monies from the sale of Guyana’s crude and its cash-based royalty will be deposited into the Natural Resource account that is being managed by the Bank of Guyana.”
Back in December, the Department had revealed that Guyana’s first three lifts of one million barrels of oil each will be sold to Shell. Shell was chosen ahead of companies like Exxon, CNNOC, Hess and BP, all of which bid for the oil. But since the oil would be sold on the spot market, there have been questions as to whether Guyana would earn less money for the oil.
This news was immediately criticised by Opposition Leader Bharrat Jagdeo, who has also said that companies participating in this process could be barred from doing business in Guyana should his party be elected next year. In addition, Auditor General Deodat Sharma had said in sections of the media that his department would look into the transaction.
In defending the decision, the Department had said that at the end of the process, Shell had the most competitive yet secure pricing.
The Department had also claimed that Shell’s global trading reach, Latin America interests and willingness to share refinery info were factors in the decision. In addition, they had reported that Shell was ready to support the Energy Department in operating the cargoes.
“The decision was based on the following criteria: A competitive pricing that limits the Government’s exposure to market uncertainty, the size, scale and global reach of the Shell trading operations, the company’s high level of integration between Upstream, Trading and Downstream,” the Department had said.
The Department also cited Shell’s “strong foothold in the Latin American markets and the size and scale of their shipping and storage operations in the region, allowing for multiple options on the Liza crude commercialisation. The range of new grades Shell has recently introduced into the market and their willingness to share critical refinery information with the DE which Guyana needs in order to understand Liza crude behaviour.”
Meanwhile, Oilprice.com reported on Monday that with West Texas Intermediate (WTI) sliding below US$50 on Sunday evening, even more downsides should be expected according to S&P Global Platts’ Claudia Carpenter, who wrote that oil prices will probably drop to the “mid-$40s” a barrel in the next couple of weeks because of weak demand, according to Matt Stanley, Director of Starfuels commodities brokerage.
Crude prices have dropped significantly in the past few weeks on concern that the virus outbreak could blunt global crude demand. Front-month Brent settled Friday at US$54.47/b, 16 per cent below its most recent peak on January 20, while WTI futures were down 14 per cent over the same period.