Ill-prepared Guyana mulls new bid rounds for oil blocks

The Government of Guyana is considering putting up oil blocks for sale via bid rounds in 2021.
This would allow Guyana to get much-needed revenue, as those awarded before were given out for free. However, concerns remain about Guyana’s preparedness for such a move.
The plan to have bid rounds was reported in another section of the media, with Minister of Natural Resources, Vickram Bharrat, quoted as saying that the rounds will happen in 2021. However, when this newspaper contacted the Minister yesterday, he said that the matter is still being discussed. The Government, he said, is expected to make a decision on the way forward, early 2021.

Unlicensed acreages are limited. All that remains offshore are the area known as Block C and the area relinquished from the Canje block by ExxonMobil in 2019.
These areas could bring in a lot of revenue for Guyana. ExxonMobil expects to find 10 billion barrels of oil in the Canje block. The area relinquished by Exxon is tucked under the Canje block and is situated very close to several of ExxonMobil’s Stabroek block discoveries.
Block C sits right on top of the Canje block and east of the Kaieteur block, which is expected to hold 2.1 billion barrels.

Key to the award of oil licences is the review of Guyana’s oil laws, the establishment of a Petroleum Commission and the production of a model Production Sharing Agreement (PSA).
Before it assumed government, the People’s Progressive Party Civic (PPP/C) touted plans to establish a Petroleum Commission to keep politics out of oil. The Government is yet to outline its legislative agenda for the introduction of the Petroleum Commission Bill, and other oil laws, which urgently require revision.
The Petroleum (Exploration and Production) Act is over three decades old. Despite Guyana’s laws providing for competitive bidding, which have been used in the mining sector, they are still outdated and require revision to keep up with modern, international best practices.
Politicians who are part of the current administration had criticized the former Government for not adequately preparing Guyana for oil, especially as it had approved two field developments without modern laws.

Additionally, in June last year, the then Opposition Leader, Dr. Bharrat Jagdeo had cautioned the David Granger administration not to award any new licences until it completed the model PSA.
This followed sustained criticism of the Stabroek block PSA, which was signed by former Minister of Natural Resources, Raphael Trotman in 2016. The Minister granted the deal under questionable circumstances with provisions widely seen as less than the country deserves. It was later revealed that Trotman ignored expert advice on multiple occasions with respect to the award of the licence and certain key financial provisions.

Jagdeo had said that no other oil company should be afforded the concessions granted to ExxonMobil for the Stabroek block, which included a permanent waiver of all taxes and the right to self-insure against natural disasters.
Jagdeo is now Vice President and is yet to publicly pronounce on the People’s Progressive Party/Civic (PPP/C)’s campaign promise of providing a superior model PSA.
The party had also promised to renegotiate several petroleum agreements, with the exception of ExxonMobil’s Stabroek block deal. Those deals have not been renegotiated. Yet, the government is considering awarding new deals.

It was the PPP/C that signed several deals with oil companies, more than the Granger administration did, giving away oil blocks at extremely generous terms. The most controversial of these were the Canje and Kaieteur blocks, which were given away by former President Donald Ramotar under suspicious circumstances, just before the 2015 elections.

Any new awards made to companies which are unqualified and which do not demonstrate proper track records of petroleum exploration and development would raise major red flags.
One of the major issues, which had plagued the awards of the Canje and Kaieteur blocks, and still does, is beneficial ownership. The Extractive Industries Transparency Initiative (EITI) has given a deadline of year-end for the revelation of all beneficial owners, but the Irfaan Ali administration is yet to provide such a register to the public and the EITI.

The Natural Resource Governance Institute (NRGI) has said that when rights are awarded, governments should ensure that certain information about the companies is made transparent, including who owns them. NRGI also urges governments to develop reliable and consistent mechanisms to keep track of the owners of oil blocks and other extractives licences.
The Guyanese public has learnt a lot from the controversial Kaieteur and Canje awards, and would expect much improvement from any new licensing process. If President Ali intends to licence new blocks in 2021, he will have a lot of preparatory work to do in a very short time.