Kaieteur News – The fact that Guyana’s maiden oil blocks auction attracted bids for only eight of 14 blocks on offer is a direct reflection of oil companies’ distrust in the unfair market that is being created by the PPP/C Government, says Opposition Parliamentarian, David Patterson.
The Executive Member of the Alliance For Change (AFC) expressed the firm conviction that oil companies have taken note of the fact that an ExxonMobil-led consortium gets to enjoy a tax-free ride along with the payment of a mere two percent royalty on the expansive Stabroek Block. Patterson said companies have no doubt taken note of government’s refusal to ring-fenced projects within the oil block, thereby allowing Exxon to charge expenses from non-producing projects against producing ones.
Meanwhile, newcomers would have to abide by a more stringent framework with fiscal rules that include the payment of a 10 percent royalty and a 10 percent corporate tax. “Exxon is having the best time of its life in Guyana because we have a government that is bending over backwards for them. Government has refused every call to have Exxon subscribe to the new terms but they want new players to do so,” Patterson said.
He said this is one of the main reasons why Guyana’s first auction only managed to secure interest in eight blocks. The parliamentarian said it has nothing to do with Vice President, Bharrat Jagdeo’s contention that the results of the auction stems from the inability of companies to secure financing for fossil fuel activities given the global move to net zero emissions.
Patterson also dismissed Jagdeo’s position that the outcome can also be linked to the fact that the government introduced more stringent fiscal terms and perhaps this scared away some investors. Patterson reasoned that if Exxon was made to follow the same rules, the industry would have recognized the government’s intent to level the playing field. He said this would have done the country well. He also pointed out that Exxon is also one of the bidders in the auction, proving once again that the introduction of more stringent terms is not to be blamed for the results of the auction.
Unless Exxon’s Stabroek Block is brought in line with the new fiscal terms, Patterson articulated that companies winning blocks from the auction would be victims of an unfair market.
Following the close of bid submissions on September 12, the National Procurement and Tender Administration Board (NPTAB) office revealed that six companies submitted offers for Guyana’s inaugural auction for 14 offshore oil blocks. According to the NPTAB, the firms bidding for the Ministry of Natural Resources project are: Total Energies EP Guyana B.V, Qatar Energy International E&P LLC, & Petronas E&P Overseas Ventures SDN BHD (Malaysia); Delcorp Inc – Guyana, Watad Energy, Arabian Drillers (Saudia Arabia); Exxon Mobil Guyana Limited, HESS New Ventures Exploration Limited, and CNOOC Petroleum Guyana Limited; Liberty Petroleum Corporation (USA)and , Cybele Energy Limited (Ghana); Sispro Inc. (Guyana), and lastly International Group Investment Inc. (Guyana), in joint venture with Montego Energy SA (London).
Prior to the auction being held, government was keen on having the Petroleum Activities Law in place and it has finalized the new Model Production Sharing Agreements that will govern future awards of deepwater and shallow water concessions. Kaieteur News previously reported that 11 of the oil blocks on auction are located in the shallow area and three are in the deepwater zone. They range between 1000 square kilometres to 3000 square kilometres with the majority of them being close to 2000 square kilometres. Government has not yet disclosed the details of the bids submitted but pledged to do so after careful evaluation of those documents. Winners of the new blocks will be expected to pay a 10 percent royalty and a 10 percent corporate tax. The cost recovery will be capped at 65 percent in a given year, while profits will be shared 50/50 between the parties. For shallow water blocks, companies have to pay a minimum of US$10 million while a minimum of US$20 million is set for deep water concessions.
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