Partners dive into legal avenues upon receipt of Guyana’s offshore license termination notice

Joint venture (JV) partners, Canada’s CGX Energy and Frontera Energy, have decided to put all legal options on the table to come up with the best way to assert and defend their interests in the Corentyne block off the coast of Guyana, following a license termination communication from the country’s government.

Within the notification, the JV partners in the petroleum prospecting license for the Corentyne block recently received, the government took the position that the permit, together with the joint venture’s petroleum agreement, was terminated.

Therefore, the government is of the opinion there are no reasonable grounds to grant any extensions to the joint venture regarding its appraisal or exploration obligations under the license or the petroleum agreement.

According to the Guyanese government, if it is determined that the permit has continued, or that the JV holds any other type of license contemplated by applicable legislation, the letter serves as a 30-day notice of its intention to cancel such a permit.

While the country’s government argues that the license has ended, it still invites CGX Energy and Frontera “on or before February 22nd, 2025, (…) to submit any representations [the joint venture] wish[es] [the government] to consider prior to [the government] making [its] final decision as to whether to not cancel any license that may exist. Any such license will cease to have effect on March 10, 2025, unless any representation that may be made are favourably considered.”

In addition, the government shows its willingness “to extend the time for good faith negotiations to the dates set forth above so as to allow receipt and consideration of any representation” the JV makes. However, the letter states that such an invitation and intention to cancel are in no way any admission that the duo currently holds a license.

Given the letter’s contents, CGX Energy and Frontera remain firmly of the view that their interests in, and the license for, the Corentyne block are in place and good standing, highlighting that the petroleum agreement has not been terminated. The JV is assessing all legal options at its disposal to assert its rights as it plans to respond to the government.

“The joint venture looks forward to expeditiously resolving this matter and continuing its multi-year efforts and investments to realize value for the people of Guyana and its shareholders from the Corentyne block,” the duo emphasized in their joint statement.

While drilling a prospect that served as an appraisal well for the Kawa-1 appraisal program with the government of Guyana, the JV made the Wei-1 discovery in 2023 as its second one on the Corentyne block, claiming that it fulfilled the obligation under Phase 2 of the second renewal period of the original ten-year license.

As part of strategic options to unlock the potential of the Corentyne block, the duo set out to explore a potential farm-down of interests in the block. Currently, the joint venture has a 100% working interest in the Corentyne block, with Frontera holding a 72% stake and CGX the remaining 28%.

The Guyana partners also retained SIA, a Subsea7–SLB joint venture, to complete a conceptual field development plan for the northern portion of the Corentyne block, covering subsea architecture, development well planning, production and export facilities, and other considerations.

The country has recorded many discoveries since 2015, with ExxonMobil proceeding to develop six projects and working to secure the go-ahead for the development of Hammerhead as the seventh deepwater oil project in Guyana.

The project will add between 120,000 and 180,000 barrels per day by 2029 to raise the country’s overall production capacity bar to nearly 1.5 million bpd. Guyana became an oil-producing nation five years ago and is working on bringing its first gas project to life.

To this end, the country’s Office of the Prime Minister recently gave its blessing for the planned $51.2 billion investment to advance the country’s flagship gas-to-energy (GtE) project.