The new petroleum agreement for Guyana’s offshore Block S4 requires a consortium led by oil major TotalEnergies to comply with the country’s Local Content Act and contribute US$1 million annually for five years to a government training fund, supporting Guyana’s push to deepen local participation in the oil and gas sector.
Article 31 of the contract binds the operator and its partners, Petronas and QatarEnergy, to meet all obligations under the Local Content Act, which requires that Guyanese companies and workers be prioritised for employment and supply contracts in the oil and gas sector.
The deal also introduces a wide-ranging government training and capacity-building component. Under Article 33, the consortium must deposit US$1 million annually into a government-controlled bank account to finance training and technical development throughout the life of the agreement. The funds can be used to provide Guyanese personnel selected by the government with on-the-job training in the contractor’s operations in Guyana and overseas, or with practical training at institutions abroad.
The training fee may also be spent on technical studies and advisory services necessary for the governance of Guyana’s petroleum sector; sending government-nominated Guyanese personnel on university and college courses or other professional training programmes; and supporting attendance at petroleum-related conferences and seminars.
The money can further be used to purchase data-management systems, technical software tools, and subscription services required for the state to administer and monitor the sector. The operator must verify the designated bank account, and the Minister of Natural Resources is required to cooperate in providing any information needed for this verification. The contribution is not cost-recoverable and is a notable increase from the Stabroek Block petroleum agreement, which required US$300,000 annually for a significantly larger block.
The agreement covers a five-year exploration period for Block S4, during which TotalEnergies must submit a work plan outlining seismic studies and drill at least one exploration well before the end of the term. The five years are separated into a first phase of three years for studies, with an optional renewal to the second phase for drilling.
Any commercial discovery may lead the consortium to apply for a production licence to develop oil or gas resources. Even though the exploration period is just five years, a production license would extend the consortium’s time with the petroleum agreement, thereby extending the period they must pay the annual training fund.
Guyana introduced its model petroleum agreement to ensure new contracts get more value for the country and support greater national involvement. The Block S4 terms continue the government’s programme of ensuring that local participation grows in the oil and gas sector.