No signing bonus from Frontera-CGX farm-in
– Dept. of Energy clarifies
Source: OilNOW
DPI, Guyana, Wednesday, July 3, 2019
The Government of Guyana did not receive revenue when Frontera Energy Corporation acquired a 33.33% share in CGX Energy’s license for exploration in the Corentyne and Demerara offshore blocks in 2018.
According to an online report by local oil and gas news site – OilNOW, this was clarified by Director of the Department of Energy, Dr. Mark Bynoe. The report explained that it was a business-to-business arrangement between the two companies, which is standard in the oil and gas industry.
CGX said in December 2018 that it had entered into a definitive rig agreement with ROWAN RIGS S.À R.L for the provision of rig services for the drilling of the Company’s Utakwaaka-1 well in its Corentyne Block.
The report further stated, in acquiring a 33.33% working interest in the two blocks from CGX Energy, Frontera bought these shares in exchange for a $7Billion (US$33.3M) signing bonus payable to CGX. According to the OilNOW article, Frontera had agreed to pay one-third of the applicable costs plus an additional 8.333% of CGX’s direct drilling costs for the initial exploratory commitment wells in the two blocks.
The news entity was quoting from an interview it conducted with Dr. Bynoe who addressed a statement in a media report which suggested that Guyana received the almost $7Billion (US$33.3M) signing bonus from Frontera for its CGX farm-in.
“Please note that the statement attributed to the Stabroek News is a mistake as no signing bonus was received by the Cooperative Republic of Guyana. Frontera farmed into the CGX blocks in the Corentyne and Demerara Blocks and paid the agreed sum for acquiring the requisite equity under a rights-offering agreement. This arrangement is consistent with previous farming-in completed, for example, by Total S.A. into the Orinduik Block,” the article quoted him as saying.
Dr. Bynoe further urged citizens to “peruse the various agreements that were released by the Government of Guyana to reduce these and other misguided statements.” He referenced several PSAs which have been published by the Ministry of Natural Resources, including the CGX Energy contract, which outlines terms and conditions of the agreement Guyana has with companies operating offshore.
On Tuesday, it was also confirmed by Minister of Finance, Winston Jordan, that no signing bonus was ever received by the government for the Frontera-CGX farm-in.
The article in question compared the $7Billion (US$33.3M) paid to CGX by Frontera for the acquisition of shares with a $4Billion (US$18 M) signing bonus paid to the government of Guyana by ExxonMobil in 2016 for the Stabroek Production Sharing Agreement (PSA). The report suggested that the ExxonMobil PSA signing bonus was inadequate when compared to the Frontera-CGX payment, for shares in blocks where no discoveries have been made.
Image: Department of Public Information
Editor’s note: This information was first published by OilNOW.