Oil blocks: “More vigilance” will be exercised during contract negotiations – VP

Vice President Dr Bharrat Jagdeo

Vice President Bharrat Jagdeo says there will be heightened due diligence as Government engages the successful bidders from the recent oil blocks auction with the aim of finalising contracts.

Since last month’s announcement of the six companies that won the bids for eight oil blocks offshore Guyana, there have been concerns expressed about the integrity of at least one of these companies.

Consequently, VP Jagdeo was questioned at his weekly press conference on Thursday about the review process of bids submitted during the auction. He disclosed that the consultants that the Government hired to review the submissions had found that only two of the international companies had met industry standards in their bids.

However, Jagdeo explained that the Government took a decision to forgo the weaknesses identified in exchange for big financial penalties, a signing bonus, and a massive upfront fee of US$20,000. This move, he pointed out, was specifically geared towards not disadvantaging locals in the bidding process.

“The review process done by our consultants, which I saw, identified deficiencies and weaknesses in almost several of the bids with the exception of the two major ones – the one involved Total and Qatar, and the ExxonMobil… [But] if you look at all the weaknesses there, you would have never awarded anything else; only those two the big companies and nothing else,” he said.

“Now, where does that leave us with these blocks unallocated? So, we made it clear that we will, given the upfront fee, the risks then get transferred onto the bidding company …we moved away from prior experience as a requirement for the bid, because that would’ve excluded all the locals and we inserted instead, a big financial penalty and a big upfront fee,” he noted.

“Many of them have not had any major track record in working in not just shallow waters but like the local group which put in a bid [and won] for deep water, which is complex,” the VP posited.

He further outlined that the government never prevented anyone from participating in the bidding process based on their nationality. The Vice President said that if there were companies with Guyanese as principals then they would have still had to meet certain requirements stipulated.

These include the ability to pay a signing bonus, which ranges from US$20 million for the deep-water blocks and US$10 million for the shallow-water blocks. Failure to pay this would result in the Government’s refusal to approve the exploration licence, Jagdeo noted, adding in the past, these licences were given away for free.

Another requirement is for these companies to come up with development plans which will be part of the agreement and failure to do so, will incur a massive financial penalty.

“So, we were not assessing based on nationality. It is whether their proposal meets our requirements and, in the negotiations, now, as we move from the award to finalising the agreements, all these issues will be verified,” he asserted.

Government, through its consultants and technical team at the Natural Resources Ministry, has started engaging the bidders to commence negotiations for the potential award of contracts/licences.

Nevertheless, as the Government moves towards the negotiations for the contracting stage, the Vice President said there would be more focus on due diligence.

“I don’t think they assessed the individuals. They assessed the proposals made. So, that’s how the due diligence was done – on the proposals. So, the consultants did that and then our evaluation team looked at the consultants’ report.

“Now, when we get to the contracting stage, this is where [we will be more vigilant], because now you have to talk about concluding deals and the ability to deliver on what you put in a proposal, because your proposal was assessed. So, when you come to that stage, this is where more vigilance has to be exercised,” Jagdeo contended.

Following its launch in December 2022, the bidding round closed in September 23, with six companies bidding on eight of the 14 blocks offshore that were up for grabs. Of the 14 blocks in the auction, three in deep-sea areas and the other 11 in shallow areas, and range from 1000 to 3000 square kilometres (sq km). Offers were made on two deep-sea blocks and six shallow-sea blocks.

Among the notable awardees was Sispro Inc, a Guyanese company owned by four women, which has received two oil blocks offshore Guyana – a shallow block (S3) and a deep-water block (D2).

Other shallow blocks were awarded to: Total Energies EP Guyana BV in consortium with Qatar Energy International E&P LLC and Petronas E&P Overseas Ventures SDN BHD (Malaysia), which got Block S4; Liberty Petroleum Corporation of the US and Ghana-based Cybele Energy Limited, which got Block S7, and International Group Investment Inc of Nigeria, which got two Blocks – S5 and S10.

Another shallow block, S8, was also awarded to the Stabroek Block partners – ExxonMobil Guyana Limited, Hess New Ventures Exploration Limited, and CNOOC Petroleum Guyana Limited.

Meanwhile, the second deep-water block – D1 – was awarded to Delcorp Inc Guyana which comprises Watad Energy and Communications Limited, and Arabian Drilling Company of Saudi Arabia.

When asked for a further update on the licensing process, the Vice President indicated that the Natural Resources Minister Vickram Bharrat would be holding a press conference next week and would speak further on this matter.