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Guyana's contract with Tullow Oil “What a giveaway!” even worse than the lopsided ExxonMobil agreement – Expert

 

 

By Abena Rockcliffe-Campbell


GEORGETOWN
Petroleumworld 10 02 2018

Yes, the ExxonMobil contract is bad. Guyana is not getting its fair share. But guess what? The contract Guyana has with Tullow Oil is even worse. This was the contention of Attorney-at-law, Charles Ramson at a recent press conference that he hosted at Cara Lodge.

Ramson, the holder of a Master's degree in Oil and Gas Management, said that the provisions of the Production Sharing Agreement (PSA) that Guyana has with Tullow Oil will cause the nation to secure an even smaller share of revenue when compared to the ExxonMobil agreement.

“We should not have entered into the agreement with Tullow and Eco which Total farmed into in 2016, because at that time, we already knew what we had. ExxonMobil had already de-risked the petroleum system and that was great for us.

“We knew with certainty that we have commercial quantities and good quality oil. We allowed ExxonMobil to get its way. The government said that it was because Exxon is the company that de-risked the basin. But contracts with all other companies after ExxonMobil should have been way better, not worse.”

Earlier this year, the government released the contract with Tullow and Eco-Atlantic.

At his press conference, Ramson noted that the Royalty for the Tullow Contract is one percent as compared to the two percent from ExxonMobil. He noted, too, that the licensing fee is also lower.

During an interview with Kaieteur News, Ramson pointed out that Government lost out on a Signature Bonus, which based on available figures, if negotiated properly could have been no less than US$40M.

Ramson also pointed out that the Orinduik Block, which Eco-Atlantic has been given, is immediately adjacent to the Stabroek block. It is just 6.5 km from the world class Liza oil discovery, which has been one of the biggest finds in the oil and gas industry in the last 10 years.

The lawyer told Kaieteur News, “If this Orindiuk Block which the government gave to Eco-Atlantic and Tullow was auctioned, Guyana would have got an immediate signature bonus and if auctioned for royalty percentage, it would have been far higher than the one percent secured.

He said that the global commercial interest for the block was proven again last year when it was announced that Total paid an option fee of US$1M to “farm-in” to the Orinduik Block.

The term “Farm-in” is referred to as an arrangement whereby an Operator buys in or acquires an interest in a lease owned by another Operator on which oil or gas has been discovered or is being produced.

Often farm-ins are negotiated to help the original owner with development costs and to secure for the buyer a source of crude oil or natural gas.
Ramson noted that in addition to Farm-in fee, Total paid Eco-Atlantic and Tullow Oil US$12.5M to earn the 25 percent Working Interest in the Orinduik Block.
Ramson said that that transaction means that Total has placed a US$13.5M value on its 25 percent interest in the Orindiuk Block.
“If we use Total's value as a benchmark, the Oriniduik Block can attract a signing bonus of over US40M, minimum.”

Ramson said that there is usually no Math attached to the arrival of a signing bonus. “It is basically how much a company is willing to pay to get in.” He said, too, that whether or not a basin has been de-risked can play a major role in the arrival of a signing bonus.
Ramson said that while Total paid Eco-Atlantic and partner US$13.5M for a simple 25 percent share in the block, Guyana gave the companies the block without a signing bonus and the companies only have to pay Guyana US$40,000 per year as licence fee.

“What a giveaway!”


________________________


Story by Abena Rockcliffe-Campbell from Kaieteur News

kaieteurnewsonline.com 10 02 2018

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