January 17, 2011

PM hopeful for massive oil discovery
- Pomeroon Block still not ready for drilling

Prime Minister Samuel Hinds says that Guyanese would benefit tremendously from possible oil discoveries in the future, but stressed that this process may take years. In an exclusive interview with Guyana Times on Friday, the prime minister said that while oil exploration here is at its initial stage, he is still hopeful for a large discovery. This, he noted, would bring about greater development for the country.

He further explained that several major oil companies are making plans for exploration, both onshore and offshore, this year. Hinds noted that government has established rules to control how the companies will undertake these explorations. He said the Guyana Geology and Mines Commission ( GGMC) will be the main regulatory body responsible for ensuring that drilling and prospecting is done within the specified frameworks set up for oil and gas exploration. Hinds told this newspaper that Guyana has a good standard agreement, which is used by oil rich countries, that will see Guyana receiving more than 70 per cent of the profit from any oil. “ One has to take account in the cost involved in the prospecting and in the actual drilling of the oil and additional works,” he added.

According to the prime minister, drilling will commence soon, in the onshore Takatu Basin, in the Apoteri K2 well, by the Takatu Oil and Gas Incorporated ( formerly Groundstar Resources), Canacol Energy Limited, and Sarges Energy Limited. This will hopefully commence in early February, and will take some three months for completion. The companies will look to drill another well in the Rewa or Piara rivers, once the first drilling is successful.Hinds related that government was criticized in the past, after CGX Energy Incorporated raised more than $ 800 million locally to fund an exploration in 2005.Hinds said that there was no return on the money raised for the exploration, additional information to help the drilling sector was realized.

“This is the nature of prospecting, it is costly and there is never any assurance and certainty,” he explained.

He said that Guyanese must understand this important fact, because while there may be hope for massive oil discoveries in Guyana, there are no assurances. Hinds further stated that the wells to be drilled offshore in the Guyana Basin may cost up to US$ 50- 100 million per well. This is dependent upon the choices made by the oil companies and whether the wells are converted from exploratory wells to production wells, Hinds added.

“Typically if people identify and strike a commercial quantity of oil now, it may take another four to five years to put things in place for commercial production to begin,” he said. When questioned as to what a massive oil discovery would mean for Guyana, Hinds explained that it will not only create employment, but it will also help to bring in huge revenue. This will boost Guyana’s economic status and create greater development in the country.Hinds noted that, once oil is found, government will be fully prepared to use the revenue received appropriately.

Hinds said that President Bharrat Jagdeo has already indicated that a special unit will be set up in the Finance Ministry, to control and record money received from the sector. He said the aim is ensuring that the money gained from these discover ies are used to the benefit of all Guyanese.

There are also plans to create a legacy fund, so that all of the money received from oil would not be spent at one time or period. Hinds said this is especially important, since oil production can only last for a period of time.

He said too that government will look at monitoring the employment within the sector, because too often in oil rich countries, people tend to leave other sectors to work in the oil sector. “ People may want to give up doing agriculture, forestry and other traditional jobs, to work in that sector, because the pay received there can be three or more times higher than other sectors” he said.

GGMC Petroleum Manager Newell Dennison told Guyana Times on Friday that companies responsible for drilling in the Stabroek Block, on the offshore Guyana Basin, recently completed a full seismic programme. According to Newell, the companies looked at a 4,600 KL 2D ( dimensional) seismic, that will help with the analysis of where the oil would be, for when they arrive at the drilling stage.

Newell said too that Repsol, YPF Guyana Limited, CGX Energy Inc and Tullow will be drilling the Jaguar 1, in the Georgetown Block, offshore Guyana in May. “ That is going to be a very deep well and it will take sometime; around six months to be completed…. It will also be the most challenging and the deepest for Guyana,” he said. The drilling is expect ed to go some four to five miles below the surface of the earth.

Meanwhile, CGX Energy Inc will begin its operation by year end in the Corentyne Block. The Pomeroon Block, for which CGX also has a licence, is still not ready for drilling. Venezuela and Guyana are in discussion to resolve the issue, since Venezuela had claimed Essequibo.