By Abena Rockcliffe-Campbell
The Stabroek Block offshore Guyana is one of the largest in the world. In fact, the biggest discovery of oil in 2015 came out of a well in this block which measures 6.6 million acres (26,800 square kilometres).
Yet, the relinquishment provisions governing the use of this block are minimal. This was pointed out by Oil and Gas Consultant, Charles Ramson during a recent interview with this newspaper.
The former People’s Progressive Party/ Civic (PPP/C) Member of Parliament said that with such a large block, no right-thinking negotiator for Guyana would have called for such minimal relinquishment provisions.
In Oil and Gas, the term relinquishment refers to the return of part or all of a lease or concession. Relinquishment is required so that an oil company can move from one phase in its work schedule to the next. Very often, when areas are relinquished, host governments seek to market the area to other companies.
Ramson, an attorney-at-law, noted that the Production Sharing Agreement (PSA) that Guyana signed with ExxonMobil in 2016 only requires the oil company to relinquish 20 percent of its huge block after the first renewal period (which adds up to seven years).
The Consultant said that Exxon’s total area in Guyana’s waters is equivalent to about 2,000 leases in the US sector of the Gulf of Mexico, “So you get an understanding of just how huge is this block. But that is on the international stage; let us look at what other companies were given here in Guyana.”
Ramson noted that CGX’s was given 4000 square kilometers and Eco-Atlantic—which has partnered with Tullow—was given 1801 square kilometers.
Ramson said that no other company has had such favourable provisions when it comes to relinquishment in Guyana.
The former MP said that the CGX contract is much more aggressive on the relinquishment of acreage relative to the ExxonMobil Contract. He said that the CGX contract compels relinquishment of 15 percent of acreage (excluding discoveries) within the first four years while the ExxonMobil contract does not compel any relinquishment of acreage until seven years later.
Further, the PSA that government signed with Eco-Atlantic allows the company control over 1801 square kilometers. That company, even with that small area, has to give up 20 percent of its block in seven years.
Often, relinquishment provisions are linked to the work plan put forward by the specific company.
Ramson noted that ExxonMobil has been given a long exploration period (10 years) and has committed to a light work commitment—one well in year one to four, and one additional well in each of the subsequent three year extension options.
The other companies—Eco-Atlantic and CGX—committed to very similar work programmes.
Ramson said that it is very important that host governments be prudent in the drafting of relinquishment provisions “because you do not want a company hoarding an area, when the country can gain revenues if that very area is utilized.”
The consultant noted that ExxonMobil is not required to give up an area where oil has been discovered in commercial quantities “and that has proven to be very common around the world.” However, “One company can find oil where another company missed it. Sometimes, you only have to shift to the right, or left or even go a little deeper.” Therefore, ExxonMobil should have been made to give up areas where oil has not been discovered much earlier that the contract stipulates, Ramson stated.
The Consultant said that all in all, ExxonMobil’s relinquishment provisions represent yet another flaw in the 2016 PSA. “This is hugely significant because this gives ExxonMobil control over a larger area for a longer period at a time when the clock on oil being the dominant source of energy is ticking.”
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