According to the vice president of the South American country, Guyana, one of the world’s busiest oil drilling regions, will provide 14 offshore exploration blocks under conditions that substantially raise its share of oil earnings.This week, officials approved an oil lease auction; the Ministry of Natural Resources will announce the schedule. Vice President Bharrat Jagdeo announced in a speech that 11 shallow-water and three deep-water exploration blocks would be up for auction.
He said work is currently underway on a new profit-sharing contract that will cover any future oil production agreements and be completed prior to the auction’s conclusion. According to Jagdeo, it will contain a 50/50 split of the oil income and add a 10% royalty charge and 10% corporate tax rate.
According to contract provisions, the revenue split shifts dramatically, with Guyana getting a larger portion of the earnings than under the terms of the current Production Sharing Agreement, according to Jagdeo. But by bringing in new producers, they ought to hasten the oil boom in the little nation.
A 6.6 million-acre (26,800 sq km) block off the coast of China has been found to contain 11 billion barrels of recoverable oil by a group led by Exxon Mobil, which also includes Hess Corp. and China’s CNOOC Ltd. The fact that Guyana, a country with a population of less than 800,000, received only 15% of the oil income from that arrangement, including a 2% royalty rate, has drawn criticism.
Oil producers may bid for as many blocks as they like, but no one business will be given more than three blocks. According to Jagdeo, each proposal must contain a development strategy that will be taken into account in addition to the financial bid.
For shallow water blocks, winning bidders are required to pay a $10 million signing bonus, and for deep water blocks, they must pay twice that amount. Additionally, they will need to guarantee at least 20% of the work development plan.