Competitive bidding best approach for award of oil exploration leases – gov’t adviser

Government’s petroleum adviser, Dr Jan Mangal says that with the discovery of the ExxonMobil Liza well, competitive bidding should be employed in the award of oil exploration leases.

In a letter in yesterday’s Sunday Stabroek, Mangal was responding to a news item in the Guyana Times of September 14th  headlined ‘Minister’s relatives, friends now applying for oil licences’, where reference was made to Dr Mangal and a relative of his.

Dr Mangal in his letter noted that the news item raises concerns about the type of process used in the award of petroleum leases or blocks i.e. the “one-on-one negotiation” or “open door” method.

The adviser noted that in the “open door” method the Ministry of Natural Resources negotiates directly with the interested party.

Dr Jan Mangal

“There is a very serious risk of corruption with this method due to the lack of transparency and accountability.  Most countries have abandoned this method as experts recommend against using it.  Guyana should no longer be awarding petroleum acreage via one-on-one negotiations after the Liza discovery in 2015”, the adviser said.

He stated that after the Liza discovery in 2015, Guyana is now in a position to use the method of competitive bidding for the award of leases.  The Liza discovery, he said,  de-risked Guyana, and as a consequence, all the major oil companies recognise that there is oil in the country.  Therefore, he said,  all the oil companies will be interested in bidding for leases in a transparent way, which ensures that Guyana leverages market forces to maximise its share.

He said that he has consistently maintained that competitive bidding is indeed the best approach for Guyana.  He added that in direct correspondence from May 2017 with one such oil company attempting to acquire acreage via one-on-one negotiation, he said that he indicated clearly to them that “Now that Guyana is on the radar post-Liza, it is my personal view that all future acreage should be leased in a way which maximizes benefit to Guyana, hence in a market orientated way by an open bid round to ensure competition.  And acreage should not be negotiated one-on-one between the Government and a prospective developer.”

He stated that the risk of “government friends and family illegally obtaining leases will be significantly reduced if an independently managed and well audited competitive bidding process is used.”  He said that there is no rush to award more leases since Guyana is already occupied with the developments in the Stabroek Block.

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