Vice President Bharrat Jagdeo said that Guyana is planning another auction of possible oil-field leases for next year. This is to keep the world’s fastest-growing economy moving forward.
Jagdeo said in an interview in Houston on Monday that the country’s first auction should happen by the end of May. It was put off for a few weeks while the government finalized contract terms and laws to make sure it gets a bigger share of the money. He said that the country has enough places to drill to justify a second sale next year.
After Exxon Mobil Corp. found huge amounts of offshore oil in 2015, Guyana’s economy is going through a big change. The Exxon projects will likely raise the country’s crude oil production to more than a million barrels a day by 2027. This is more than Algeria and Angola, which are both members of OPEC. But since most of the developed world wants to stop using fossil fuels, Guyana wants to get its crude resources out of the ground and sell them as quickly as possible.
Jagdeo said at the CERAWeek by S&P Global conference, “We have a lot of decisions to make right now so that we don’t slow down the pace of development.”
After Exxon’s contract was criticized for being too generous, Guyana is changing the production-sharing contract that governs oil deals with foreign companies. This is to make sure that the government gets more money from oil deals.
The country wants to raise royalty rates from 2% to 10%, raise the corporate tax from 0% to 10%, and lower what are called “cost-recovery limits” for oil companies. Jagdeo said that even with these changes, the new contract will make sure that Guyana stays “one of the most competitive countries in the world.”
Once the terms have been agreed upon and written into law, big oil companies will be asked to bid on 14 oil blocks. Companies will be allowed to win a maximum of three blocks each to ensure multiple exploration programs can progress simultaneously.
Jagdeo said that “quite a few” big oil companies from the US are “very interested” in the auction.
Guyana has gotten $350 million in 2020 and 2021, and $1 billion in 2022, since oil started flowing there. Some of the money goes to the government’s budget, and the rest goes to a fund called a “sovereign wealth fund.” Jagdeo said that Guyana has given contracts for 12 hospitals and 7 hotels and is building a natural gas pipeline that, when finished in December 2024, will cut the price of electricity by 50%.
Jagdeo said that because of a lack of workers in big cities like Georgetown, Guyana has let Chinese and Indian companies bring in work crews. It’s a big change from the past, when Guyana had a lot of unemployed people.
Jagdeo says that one of the biggest risks to Guyana’s oil boom is that the government is spending too much money. He said that most of the money that has been spent so far is going toward capital projects rather than on-going costs.
