Repsol’s current activity in Guyana is focused on the Kanuku block 150 kilometers offshore Guyana. Repsol operates the block with a 37.5% working interest. We are targeting an oil prospect in the Kanuku block, where we plan to drill the first exploration well in 2019 to determine if hydrocarbons are present. The internal and external impact studies will begin in 2018.
The Kanuku block is located in an area near existing oil and gas discoveries. However, there is a high level of uncertainty at this stage of the project. Repsol is continuing to invest in exploration activities to move toward de-risking the block.
Repsol has been present in Guyana since 1997. We drilled our first Guyana exploration well in 2012 in the Georgetown block, and at the end of the Georgetown license we successfully applied for and received a new Petroleum Prospecting License in 2013 for the Kanuku block. We completed 2D and 3D seismic acquisition in the Kanuku block in 2013 and 2017, and we plan to drill the first exploration well in 2019 to determine if hydrocarbons may be present.
Repsol operates the Kanuku block with a 37.5% working interest. The block is located 150 kilometers offshore Guyana in 70-100 meters of water. Repsol is targeting an oil prospect in the Kanuku block, where we plan to spud the first exploration well in 2019.
Repsol completed the acquisition of 2D in 2013 and 3D seismic data in 2013 and 2017 on the Kanuku block and plans to drill the first exploration well in 2019. Repsol has invested approximately $60 million USD to date in the Kanuku block exploration program.
Repsol signed its PSA for the Kanuku block with the government of Guyana in 2013. The contract is currently in the first renewal period for three years.
The PSA is accessible on the Ministry of Natural Resources website through the link shown below. We were in agreement with the Ministry decision to make public the PSA.
A PSA is the contract between the government and IOC (international oil company) granting rights to conduct oil and gas exploration activities in a specific block or area. It defines the amount of production to be shared with the IOC conducting the operations, if the exploration campaign is successful and the company decides to move forward with development. These terms are negotiated by the government at the beginning of the PSA before exploration activity begins.
The PSA is negotiated by the government before exploration activity begins. It is signed at the beginning of a project before any hydrocarbons are found.
The terms of the PSA are negotiated between the government and the IOC. Many regulators have a model PSA that is customized to the specific area to be explored, based on the degree of difficulty and risk involved.
In Guyana, the PSA is approved by the Minister of Natural Resources on behalf of the government. The terms are agreed by the government and the IOC making the investment to explore the specific block or area.
In Guyana, the PSA is effective for 10 years. The initial period is four years, with two three-year renewal periods. Repsol signed the PSA for the Kanuku block in 2013 and is in the first renewal phase of the contract with a commitment to drill one exploration well.
Yes, it is possible to modify or update the agreement.
Royalties are the percentage of production (hydrocarbons produced) that is paid in cash to the government by the IOC conducting the operations.
Profit oil is calculated as the total oil produced from a project, minus the cost of producing the oil and the recovery costs of finding the oil. Each month, these costs are deducted from the total production and the result is profit oil.
The investment cost of exploring for hydrocarbons is very high, with no guarantee of a commercial discovery. Governments can offer the IOC the opportunity to recover the cost of exploring as an incentive to invest, especially in areas that have not been previously explored. If there is a commercial find, the IOC may be limited by the terms of the PSA for how much of the total cost of finding the oil it can deduct from its monthly production.
The terms of a PSA reflect the history of oil and gas activity in the area. A contract in a well-established area with a history of development will look very different from a contract in an unproven area with limited activity. This is because there is more uncertainty in areas that haven’t been de-risked. The terms of the PSA can help to offset the higher risk and incentivize the IOC to invest.
Tax exemptions are common to attract investment in areas that are unproven with limited oil and gas activity. For example, in some cases the taxes for importing equipment are higher than the actual cost to drill an exploration well. This would make the project uneconomic without a tax exemption.