Post by
OIL_RUN on Oct 05, 2020 10:40am
CALM & PATIENCE
I watched the video as well and agree with waitingstill. The comments seemed to be directed to all participants in the basin - not just CGX.
I believe CGX will get the licenses renewed with perhaps a 6-12 month drill extension to meet their current work commitment obligations. Let’s not forget, the contract CGX has with the government includes a force majeure pandemic provision.
However, a potential extension gratned by the government to CGX/ Frontera sets a precedence. If CGX gets an extension, every participant in the Guyana basin will want one as well. So, it is indeed a difficult decision by the government.
In my opinion, even with the pandemic, the government will likely push and ask CGX/Frontera to relinquish 25% of their license area as stipulated in the minimum work obigations. The government has made it clear on both sides, they do not want to issue or extend any licensing agreement under existing fiscal terms - given how favorable the terms are to the operator. And they are indeed very favorable! Any new offshore licenses the government grants going forward will be far more stringent and carry strong fiscal terms that favor the government given that the basin has been significantly de-risked. This message is directly intended for all participants currently in the basin and includes Repsol’s, Tullow, JHI Total, Mi-Atlantic, Eco-Atlantic, Catalena Energy, Anadarko, Ratio, etc.
CGX will have valid arguments as to why they should receive an extension. As a matter of fact, I would argue CGX has spent more money in the Guyana basin drilling and capturing modern 3D seismic than any other participant other than the Stabroek venture partners. I would definetly argue CGX has spent more than some of you larger operators such as Repsol, Tullow, and Anadarko. Repsol and Tullow spend, in particular, is just shamefull considering the size and scale of these organizations over the past decade.
In addition, CGX/Frontera have exceed their contractual obligations in terms of acquiring 3D seismic on their licenses. My goodness, CGX just 6 months ago shot additional modern 3D seismic over the Northern Corentyne Area - so. hard to say they are just standing still.
Also, CGX have participated in drilling Jaguar-1, Eagle-1 and Horseshoe-1 offshore Guyana. That's the same number of offshore wells Repsol and Tullow have drilled! Both Tullow and Repsol have been in the basin since the maritime border dispute was resolved in 2007. In fact, didn't Repsol steal CGX's 25% in the Georgetown license? In turn, told the government of Guyana CGX was slowing their pace of offshore activity? In my opinion, its these companies (and the others) the government of Guyana is looking to send a message to as well.
Finally, let's not forget it was CGX that financed the maritime border dispute. No one understands that better than Jadego and the PPP - it was during this time that Jadego was President of Guyana. Man, did CGX make the government look good in that one! The Guyanese people can thank CGX for their loyal committment there. Let's put this into perspective - it's because of the maritime border the entire Turbot area (Haimara, Pluma, Redtail, Yellowtail, Tripletail, Longtail, Tilapia) belong to the people of Guyana. That's perhaps half of the resources Exxon has discovered in the Guyana basin to date. Tell me another example over the last 20 years that would have created more value to the people of Guyana than the maritime border dispute?
Going back to Jadego's comments - he is correct. CGX/Frontera (and others participants in the basin) need to get the ball rolling!
It's great CGX is the only indegenous managed explorer in the basin - however, it seems special relationships and with the government will no longer allow the venture to obtain extensions. Not when other operators are pounding on the door and willing to pay big money to the government to acquire rights to Guyana's offshore area.
Now, this is pretty typical, from what I have seen over my lifetime, with remote offshore hydrocarbon basins going from no resources to all of a sudden becoming a hot spot. Examples include: Uganda, Ghana, Kenya, Mozambique, Senegal, Mauritania, etc.
Typically, as the basin becomes “hotter” the government tightens the rope on all players in the basin. What typically happens when the rope is tightened you will see added motivation for consolidation. Consolidation which helps to speed and accelerate activity.
However, the governments mentioned above typically take extreme caution in ever threatening to pull a license as the implications can be extremely negative!. The risk and threat will scare off capital and interest from the private sector. In especially inthe case of CGX having a force majeure pandemic clause. As someone posted earlier (perhaps YD and others) - it's not the time to for CGX to get in a media spat with the government. It's time for CGX to rise to the situation, pull their big boy pants, and start moving!
Ultimately, I am glad the article was released and Jadego made the comments. I hope Frontera (de Alba) read the article, listened to Jadego, and obtains a clear cut view of CGX's current standing with the government and what needs to be done going forward.
Just my two cents... Calm and patience is required. Interested in seeing de Alba's next move...