Guyana Bidding Rounds

On December 9, 2022, Guyana released the preliminary terms for an oil and gas tender covering a total of 14 offshore blocks, including 11 deep water blocks and three shallow water blocks.¹ Guyana estimates that the blocks included in the tender have aggregate reserves of 25 billion BOE.

Bidders: The tender is open to any company or consortium, irrespective of nationality, that can comply with the stated health, safety, environmental, technical and financial requirements.² The stated intent of the tender is to encourage open competition for all 14 blocks, however the Government retains the discretion to limit any award to a maximum of three blocks. Companies tendering for more than one block must therefore submit their bids in the order of preference. 

Bid Fee: There is a mandatory participation fee of US $20,000.00 per block per participating entity, even when participating through a consortium. The deadline to pay the fee is April 7, 2023. Access to the data room is conditional on payment of the participation fee. 

The preliminary calendar for the tender is as follows:

Qualification Criteria

A legal entity participating as a sole bidder must qualify as an operator for either a deep water or shallow water block, however, there are means to satisfy some obligations through an affiliate's experience or financial capabilities.

For any consortium bids, the operator shall hold at least a 35 percent participating interest in the particular block, while any non-operator must hold at least five percent.Operators are required to satisfy all technical requirements for the bid (including health, safety and environmental). Non-operators may contribute to the minimum financial requirements of the qualification, and have some technical obligations as well. A summary of the published qualifications are as follows:

Deepwater Blocks

• Minimum of ten years operational experience in deep water blocks
• Production history of >200,000 bopd as an operator (>30,000 bopd for non-operators)
• Ownership of proven reserves of >200 MMboe (>20 MMboe for non-operators)
• Experience in operating HPHT listed as "desirable"
• three–five years’ experience with health, safety and environmental program implementation, including compliance with ISO regulations
• Provide audited financial statements for the previous five years
• "Current Ratio" (Current Assets – Current Liabilities) equal to or greater than one
• Debt to equity ratio equal to or less than 50 percent
• Interest coverage equal to or greater than 2.00
• Investments in deep water operations over the last three years equal to or greater than US $300 million (US $50 million for non-operators)

Shallow Water Blocks

• Minimum of five years operational experience in shallow water blocks
• Production history of >10,000 bopd as an operator
• Ownership of proven reserves of >50 MMboe
• Experience in operating HPHT listed as "desirable"
• three–five years of health, safety and environmental programs implementation including in compliance with ISO regulations
• Provide audited financial statements for the previous five years
• "Current Ratio" (Current Assets – Current Liabilities) equal to or greater than one
• Debt to equity ratio equal to or less than 50 percent
• Interest coverage equal to or greater than 2.00
• Investments in deep water operations over the last three years equal to or greater than US $30 million (US 10 million for non-operators)

Contract Duration

Shallow water blocks have a five-year exploration phase and a 20 year production phase, with a possibility of renewal based on negotiated terms with the government. Deep water blocks have a ten-year exploration phase and a 20-year production phase, which may be extended for an additional ten years.

All blocks will have a relinquishment obligation of 50 percent of the original area at the end of the initial period, and a further 50 percent at the end of the first renewal period, excluding areas designated for development.

Commercial Terms

The main commercial terms are:

• A royalty rate of ten percent;
• Cost recovery will be allowed, but cap set at 65 percent; 
• Profit sharing of 50 percent, although it is worth noting that until the model agreement is made public, it is unclear when this profit sharing kicks in or the mechanics behind it; and
• There is a minimum signing bonus required from the bidders of US $20 million for deep water and US $10 million for shallow water blocks (which will be used in assigning a value to each bidder's offer and potential tie breaker).

In terms of tax, the tender provides that a corporation tax of ten percent and a property tax of 0.75 percent will be levied on the participating entities (as applicable). 

Finally, it is worth noting that bidders will be required to commit at least US $1 million per year towards the employment and training of the citizens of Guyana in accordance with the Local Content Act.³

Oneka Archer-Caulder (Latin America Fellow, White & Case, Houston) assisted in the development in this publication.

_{1 https://nre.gov.gy/2022/12/09/guyana-launches-first-licensing-round-foroffshore-oil-and-gas-exploration-and-production/
2 https://parliament.gov.gy/documents/acts/8170-act_no._3_of_1986_petroleum_(exploration_and_production)_act_1986.pdf
3 https://www.parliament.gov.gy/publications/acts-of-parliament/local-content-act-2021-no.-18-of-2021}

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