According to Vice President Bharrat Jagdeo, the Guyana government will accept the sale of Tullow’s 60% ownership in the Orinduik Block to Toronto-based Eco Atlantic (Oil and Gas) Limited.
Tullow, based in the United Kingdom, revealed last month that it was selling its stake in the Orinduik Block for an estimated US$700,000, subject to regulatory approval.
“We’ve agreed in principle that Tullow will be allowed to sell its share to Eco and exit that Block,” Jagdeo said at a news conference.
Regarding the Kanuku Block, Jagdeo stated that a letter requesting a fresh prospecting permit was sent to the government in May of this year. While few individuals were aware of the letter, he stated that the land was returned to the Guyana government when the 10-year license expired.
According to Jagdeo, if a policy decision is made to favorably examine the application for a new prospecting licence, the business will now be required to comply with the requirements of the new Production Sharing Agreement. They include a smaller block size, a signing incentive, increased royalty, and other new fiscal constraints.
“If you decide to renew the prospecting license, they would also have to have a very aggressive development plan,” Jagdeo explained.
Tullow has already spent US$500 million digging three exploratory wells and doing 3D seismic surveys for the whole Kanuku Block, according to Jagdeo, and if the business walks away, it will lose all of the money it has committed because it has not progressed to production.
“The government of Guyana or the people don’t have to pay back for that because the exploration activity is done at the risk of the investor,” he said, adding that he was concerned that negotiating with Tullow would jeopardize the auction and that other companies “might want to come through that route as well, and we may not get the best deal out of an aggressive exploration plan.”
Jagdeo stated that the government would have to examine the company’s expertise in that block, and that if granted, Tullow would still be part of the Kanuku Block and should receive a renewed licence despite having vacated the Orinduik Block.
