Exclusive-Exxon, Guyana in talks to return unexplored offshore oil areas


A replica of Exxon's Liza Unity production vessel is seen in the company's booth at Guyana Energy Conference and Expo in Georgetown

Wed, June 21, 2023 at 5:14 AM MDT·2 min read
By Sabrina Valle

HOUSTON (Reuters) -Exxon Mobil Corp and Guyana are in talks over which unexplored offshore areas will be returned to the government, people close to the discussions said, as the nascent oil nation seeks to attract new operators to the country.

The Exxon-led consortium that controls offshore production in Guyana this year was required to return 20% of unexplored acres, under the original 2016 production contract.

The acres will include parts of its crown jewel 6.6-million-acre (26,800 sq km) Stabroek block and two other blocks not yet in production.

Guyana wants to re-market the acreage to others to speed the country's economic development and reduce the Exxon group's dominance over its energy output. Officials aim to boost oil and gas production ahead of demands to cut carbon emissions to net zero by 2050.

Exxon is in compliance with the local legislation and in "ongoing discussions with the government regarding these requirements, in respect to both timing and area," a company spokesperson said.

Exxon and its partners Hess and CNOOC produce about 375,000 barrels of oil per day from two offshore vessels. The group has approved a total of $45 billion in outlays to triple its output by 2027 from five oil platforms.

CONTRACT FORCE MAJEURE

The relinquishment deadline for the 20% unexplored portion of the Stabroek block is due in October, one of the people close to the discussions said. The government agreed to an up to one year extension, citing difficulties during the COVID-19 pandemic that prevented some work.

Guyana's Energy Ministry did not immediately respond to requests for comment.

The consortium could return some of the areas as soon as the third quarter of this year, the people said.

The group separately aims to accelerate to as early as September the start up of the third oil production vessel, Prosperity, which will bring total production to 600,000 barrels of oil and gas per day in early 2024, the people said.

Guyana and the U.S.-Chinese group are also negotiating the return of about 20% of the unexplored areas of the group's other two blocks, Kaieteur and Canje, which have yet to start production.

The returned areas could be either included in a competitive auction or directly negotiated with other governments in bilateral agreements for oil exploration, one of the people said.

The Production and Sharing Agreement signed between Guyana and the Exxon-led group in 2016 allows for prospecting license extensions. But it requires at least 20% of unexplored or undeveloped areas be returned at the renewal.

Guyana plans to hold its first competitive oil blocks auction in August, which it expects to attract new operators to the country. It will offer 14 offshore blocks outside the Exxon group's domains.

(Reporting by Sabrina Valle; Editing by Lincoln Feast and Daniel Wallis)