The Government of Guyana, via its Ministry of Natural Resources, is planning the auction off 14 oil blocks in the nation’s first-ever competitive offshore oil and gas sale. Royalty required of investors will be higher, this time around.

Previously, blocks were sold to a consortium led by Exxon Mobil which to date has been responsible for all output in Guyana, since the Stabroek block began producing in 2019.

It is indicated that qualified and local companies with a proven track record of technical, financial, health and safety, and environmental capabilities can bid, the agency said.

Bidders will be assessed based on their guaranteed work programmes which will be weighed with the offered signing bonus. Local content commitments will also be fully examined.

On offer are 14 oil blocks in the nation’s first-ever competitive offshore oil and gas licensing round.

The auction will be done under new fiscal terms that will guide future offshore investments should projects reach production stage, the Government said in a release on November 4.

The blocks range in acreage from 1,000 sq km to 3,000 sq km. Eleven are in shallow water, while the remaining three are in ultra-deep water. Oil companies participating in the upcoming auction will be required to pay a minimum signing bonus of US$10 million for shallow blocks while deep-water blocks carry a signing bonus of US$20 million.

As part of this new model agreement, the royalty has been increased to 10 per cent from the two per cent granted to Stabroek block.

The current 75 per cent cost recovery ceiling has been lowered to 65 per cent. Profit sharing after cost recovery remains the currently applied 50-50 system between the contractor and the Government of Guyana. These new terms have doubled Guyana’s share to 27.5 per cent from 14.5 per cent, plus the newly introduced 10 per cent corporate tax.

There will be no restrictions on how many bids a company may submit, however, each successful bidder will be limited to an award of three blocks.

The ministry notes that to facilitate the auction, the Government of Guyana will make amendments to the Petroleum (Exploration and Production) Act 1986 to reflect, where necessary, fiscal changes identified for this national bid round and all future operations. The licensing round process is expected to last for five months and should be concluded by the end of first quarter 2023.

Guyana’s earnings from oil have already surpassed US$1 billion. To date, it is projected that deposits into the National Resources Fund for 2022 will total US$957.6 million, comprising some US$857.1 million earned from the Government lifts of profit oil, and an additional US$100.5 million from royalties.

About 10 billion barrels of recoverable oil resources have been found in the Stabroek block.