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Guyana Suspends Oil Auctions To Set Up Oil Ministry

Guyana

Guyana has put all oil auctions on hold until it sets up a ministry to deal with all things energy, Reuters reports, citing Minister of State Joseph Harmon. One of the hot spots in oil, the tiny South American country has enjoyed the attention of none other than Exxon, which discovered its first oil field there in 2015.

Exxon entered Guyana, a neighbor of Venezuela, in 1999. Since then, Reuters notes, the Guyana government has awarded it the rights to explore hundreds of blocks offshore. In partnership with Hess Corp and China’s CNOOC, Exxon has so far discovered reserves of more than 3 billion barrels of crude.

Two years ago, the consortium and the Guyana government extended the contract they were operating under, agreeing to a 2-percent royalty and an equal split of profits after the recovery of production costs. Yet opposition parties have criticized the agreement, saying royalties were too low. The decision to set up a special ministry for energy followed these criticisms. Until that institution is created, there will be no oil auctions, apparently.

“If you want to call that being on hold you can do so, but what I am saying it is basically an administrative process which is basically requiring the Department, which was only established on the 1st of August, to get a better sense ... of the lay of the land, before they start to proceed to engage people and to make decisions,” the Minister of State told Reuters.

Related: Here’s What’s Next For Russian LNG

The Exxon consortium has so far made nine discoveries off the shore of Guyana, which could together yield some 750,000 barrels of oil equivalent daily by 2025. Now Tullow Oil is preparing to start drilling in its Orinduik license plot, which neighbors the Stabroek area where Exxon has made its discoveries.

Having a special ministry dedicated to energy issues seems like a good idea; Guyana is a tiny country with a population of 800,000 and no history of oil production. Its transformation into an oil producer will certainly change a lot of things. It’s anyone’s guess if Guyana would be able to avoid the oil curse that has wrecked the economies of so many countries, including, notably, its neighbor Venezuela.

By Irina Slav for Oilprice.com

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