GEORGETOWN, Guyana– Cabinet has approved auctioning 14 oil blocks offshore Guyana, Vice President Dr. Bharrat Jagdeo announced on Thursday.
The auction was initially slated for the end of September. However, the vice president noted that extensive preparatory work had to be completed. The government hired IHS Market as the lead consultant for this process.
The Ministry of Natural Resources will issue a new date for the auction in due course; Jagdeo assured prospective bidders would be provided with the auction terms “long before” it is formally launched.
He explained that the government had decided to auction 14 blocks ranging from 1,000 to 3,000 square kilometers each, with the majority measuring closer to 2,000 square kilometers. Eleven of these blocks will be located in the shallow area, while the other three will be in the deep-sea area.
The vice president said the new fiscal regime would govern the award of the contracts with the successful bidders and subsequent Public Sharing Agreements (PSAs) for any other exploration already taking place in other areas, including Kaieteur.
“So, the 50/50 profit sharing will be retained…. The royalty rate will go to 10 percent. There shall be a corporate tax of 10 percent. The maximum for any given year going to cost oil will be 65 percent. These are the key fiscal conditions,” he said.
“We have the consultants working to strengthen the PSA to be ready before the auction is concluded because we have to strengthen the PSA in many areas. The PSA will be amended to reflect these new fiscal terms.”
Jagdeo said the overall PSA would be strengthened, and the country’s laws would also be amended to reflect, where necessary, these amendments.
“For example, the Petroleum Act, if there is anything inconsistent in the Petroleum Act with what I just mentioned, that will be amended,” he clarified.
Jagdeo said one of the main objectives of the new fiscal regime is to ensure a more significant profit share for Guyana. The other aim is to ensure that the country remains globally competitive at net zero.
“We looked at the spectrum of countries and the total government takes, starting with those with minimal takes and those with major ones. We opted for a simple formula with fixed royalties. Some countries have variable royalties depending on the internal rate of return on the project, etc.
“We did not go down a complex system because it’s hard to monitor those. The fixed quality also protects you against the downside when oil prices drop. See, you get as if you have a variable royalty, and when oil prices drop, you lose,” he explained.
Further, Jagdeo said IHS Market conducted most of the simulations and assured the government that the 10 percent royalty and the 10 percent corporate tax would ensure the country remains competitive.
The government has also decided to allow local and international companies to bid, with minimum technical and financial qualifications required to make the bidding process more competitive.
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