An informative press conference where Bharrat Jagdeo provides an updated review of the Guyana E&P sector.
A few clips about the CGX extension has been shared already - but, many key topics were left out (in my opinion).
1. Guyana Offshore Bid Round Update:
Not a single contract has been signed or awarded to date. As Bharrat states "for various reasons some participants in the bid round cannot find partners and some cannot raise the fees (signing bonus). If the participants cannot find the partners or raise the fees - the Government would look to abandon the process."
Bharrat goes on to further state: "For Exxon, they have expressed concern over the non-fiscal conditions of the contract." More specifically, "Guyana's new PSA is not as competitive as the Stabroek license. If Exxon, or other operators, had the same Stabroek terms, the Government of Guyana would likely have had more bidders and possible awards. Guyana has changed all that to increase the royalty rate from 2% to 8%, added a 10% corporate tax, and setting a 65% cap on cost recovery. This has made Guyana's regime less attractive compared to other opportunities globally."
2. Industry Challenges & New Exploration Era:
Bharrat states, "[Firstly], the era now has led E&P companies to be very selective. There are over 70 other auctions taking place around the world. Second, the capacity to finance exploration activities at this stage has been seriously diminished on a global basis. Thirdly, E&P companies are concerned that exploration efforts after 2030 might be left stranded [industry moving away from developing fossil fuels].
3. Prioritizing Guyana's Discovered Condensate & Gas Fields:
Bharrat states: "Guyana Government has made it clear from the beginning it wants to monetize its discovered gas resources...as a means to add to the revenue stream that comes from the production of oil. Exxon's position has been it needs to reinject gas in order to maintain the quality of the wells and their flow. Our views are different. Guyana believes (or has been told), it can maintain the quality of oil production and also monetize the gas."
Bharrat goes further stating: "In the beginning, Exxon told Guyana [development of gas] is not a priority. Oil production is the priority. So, Exxon was not giving these resources enough attention. So, Guyana told Exxon you need to do the study and if the assets you have found gas - like Haimara and Pluma - then you should give them up for other companies to see if they can independently develop the resources. Exxon has now come back to Guyana and said they are taking the gas development seriously and are willing to work with the government to monetize these resources. In turn the Guyana Government mentioned they would like to accelerate the development of the resources - and are willing to identify other companies to help with accelerating development of the resources."
"Guyana Givernemnt went out for expressions of interest and there were two proposals: one from Fulcrum (with support from McDermott, Baker Hughes, and several large private equity companies). Secondly ranked was another good proposal received from CNOOC."
Emphasis added: "At this stage, the best option would be for Exxon to move forward as these reservoirs contain a significant amount of condensate, as we have learned. In turn, Exxon will be able to monetize the condensate in conjunction with the gas. Ultimately, the government is playing the role to move the project forward.
Further Emphasis Added: "If you go to a field like Pluma and Haimara, there is a lower oil to gas ratio [as compared to other Exxon projects]. However, there is still a considerable amount of oil and condensate that can be monetized at these fields. Originally, Exxon was only prioritizing those fields with a high oil to gas ratio. Now, they are starting to move forward with developing those fields where the oil to gas ratio is lower. As such, the Government of Guyana is asking them to develop both the gas and oil - as a means to maximize the overall revenue stream.