Hyperdyamics Reveals Impasse in Plans to Drill Exploration Block Off Guinea
Hyperdynamics Corporation, an independent oil and gas exploration company, revealed Tuesday an impasse in plans to resume petroleum operations and move forward with drilling an exploratory well under the Joint Operating Agreement governing the oil and gas exploration rights offshore Guinea (JOA), West Africa. The impasse reflects a refusal by the participants in the Guinea project, Tullow Guinea Ltd., (Tullow) a wholly owned subsidiary of Tullow Oil, PLC and Dana Petroleum (E&P) Limited, (Dana) a wholly owned subsidiary of the Korean National Oil Company, to meet their obligations under the JOA and the Production Sharing Contract with the Government of Guinea (PSC).
In August 2015, Tullow as operator under the JOA presented to Dana and Hyperdynamics, through its subsidiary, SCS Corporation Ltd. (SCS), a work program and budget to complete drilling of a well before the September 2016 deadline established by the PSC. Tullow and SCS voted in favor of the work program and budget, and it was deemed passed by this vote. On Sept. 23, 2015, Tullow submitted this work program and budget to the Guinea Minister of Mines and Geology. Pursuant to Article 9.4 of the PSC, the annual work program and budget is deemed approved 30 days after submission, and that period has passed. Tullow also submitted a contracting strategy to the Guinea Government and initiated well preparation procedures that included visits to Guinea and meetings with Guinea government officials, all of which indicated that Tullow was on course to resume petroleum operations.
However, in an Operating Committee Meeting on Nov. 18, 2015, in contrast to its prior actions, Tullow stated that it would not restart petroleum operations unless Dana agreed to fund its portion of well costs, which Dana declined to do.
Following Tullow's now withdrawn declaration of force majeure, both Dana and Tullow had raised concerns in 2014 that the Foreign Corrupt Practices Act investigations into Hyperdynamics could cause the Guinea government to question titles provided by the PSC. Notwithstanding the conclusion of those investigations, Dana maintained its position that it would not agree to fund well costs absent further assurances from the Guinea government that the Guinea government would not challenge ownership rights under the PSC. Since that Nov. 18, 2015 meeting, Hyperdynamics has engaged in discussions with Tullow and Dana relating to these positions.
At a Petroleum Operations Management Committee in Guinea on Dec. 16, 2015, Tullow and Hyperdynamics met with representatives of the Guinea Minister of Mines and Geology. Dana declined to attend the meeting. At the conclusion of those meetings on Dec. 17, 2015 the Guinea government agreed to the exact title assurances proposed by Dana, and agreed to by Tullow in previous communications, as an amendment to the PSC. At the meeting, Hyperdynamics executed the amendment and Tullow and the Ministry of Mines and Geology of Guinea initialed the document. Tullow committed to moving the amendment through the necessary approval processes at Tullow.
As of this date, neither Tullow nor Dana has signed the PSC amendment, and both have stated that they will not sign unless the other party signs first. Both have repeatedly refused to sign first, declined Hyperdynamics' suggestion that they sign simultaneously, and have refused to agree to restart petroleum operations.
Hyperdynamics believes that neither Tullow nor Dana has the ability under the JOA to block resumption of petroleum operations regardless of whether a PSC amendment was negotiated. In any event, the fact that the Guinea government agreed to the PSC amendment has removed any title concerns Tullow and Dana had about moving forward with the resumption of petroleum operations.
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