Latest update April 20th, 2024 12:59 AM
Mar 18, 2018 ExxonMobil, News
By Abena Rockcliffe-Campbell
Charles Ramson is of the opinion that the decision taken by the Government of Guyana not to auction its remaining oil blocks, after the 2015 oil find that de-risked the basin, is a decision that has cost the nation greatly.
Ramson, the holder of a master’s degree in Oil and Gas Management, said that the 2016 contract signed between the Government of Guyana and oil companies, Eco-Atlantic and Tullow Oil is a reflection of the blunder made by the government.
Government released the contract which features a one percent royalty on Friday.
Yesterday, Ramson said that in addition to the many poor provisions of the contract, Government lost out on a Signature Bonus which, based on available figures, if negotiated properly could have been no less than US$40M.
The lawyer noted that Government negotiated with Eco-Atlantic even after Guyana’s oil basin had been de-risked in 2015. “This negotiation was done while the Guyana basin was being viewed as one of the most attractive in the world.”
Ramson also pointed out that the Orindiuk Block, which Eco-Atlantic has been given, is immediately adjacent to the Stabroek block. It is just 6.5 km from the world class Liza oil discovery which has been one of the biggest finds in the oil and gas industry in the last 10 years. “This means that by way of geology, this block is likely to be very lucrative,” said Ramson.
The lawyer told Kaieteur News, “If this Orindiuk Block which the government gave to Eco-Atlantic and Tullow was auctioned, Guyana would have got an immediate signature bonus and if auctioned for royalty percentage, it would have been far higher than the one percent secured. That one percent is even lower than the two percent the government gave to ExxonMobil.”
Ramson said that the government has a responsibility to tell the nation why this block was not auctioned.
He said that the global commercial interest for the block was proven again last year when it was announced that Total paid an option fee of US$1,000,000 to “farm-in” to the Orinduik Block.
The term “Farm-in” is referred to as an arrangement whereby an Operator buys in or acquires an interest in a lease owned by another Operator on which oil or gas has been discovered or is being produced. Often farm-ins are negotiated to help the original owner with development costs and to secure for the buyer a source of crude oil or natural gas.
Ramson noted that in addition to Farm-in fee, Total paid Eco-Atlantic and Tullow Oil US$12,500,000 to earn the 25 percent Working Interest in the Orinduik Block.
Ramson said that that transaction means that Total has placed a US$13.5M value on its 25 percent interest in the Orindiuk Block.
“If we use Total’s value as a benchmark, the Oriniduik Block can attract a signing bonus of over US40M, minimum.”
Ramson said that there is usually no Math attached to the arrival of a signing bonus. “It is basically how much a company is willing to pay to get in.” He said, too, that whether or not a basin has been de-risked can play a major role in the arrival of a signing bonus.
Ramson said that while Total paid Eco-Atlantic and partner US$13.5M for a simple 25 percent share in the block, Guyana gave the companies the block without a signing bonus and the companies only have to pay Guyana US$40,000 per year as licence fee. “What a giveaway!”
Just a week ago, Ramson made a call for the release of the Eco Atlantic/Tullow oil contract, which was signed in 2016. This agreement was signed long after Guyana knew that it had a proven petroleum system of high quality oil with initial estimates of close to 1.4 billion barrels of recoverable oil. This has now gone to well over three billion barrels of recoverable oil.
Last week, Ramson said that the contract will prove how well the government did in being managers of Guyana’s oil and gas resources.
Yesterday, Ramson said, “The released contract shows that it is a dead giveaway and a sellout.” He questioned, “How can Guyana ever use oil for maximum transformation if we do not get good deals at the very beginning?”
Where is the BETTER MANAGEMENT/RENEGOTIATION OF THE OIL CONTRACTS you promised Jagdeo?
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