February 28, 2004

Offshore dispute nears end for CGX

Financial Post

By Claudia Cattaneo, Calgary Bureau Chief

CALGARY - A junior Canadian oil and gas company whose drilling rig was evicted from Guyana 's waters by Suriname gunboats nearly four years ago said yesterday the offshore boundary dispute that prompted the dramatic measure may be getting closer to resolution.

Kerry Sully, president and CEO of Toronto-based CGX Energy Inc. , said that after several unsuccessful attempts between the two South American countries to resolve the dispute diplomatically, the government of Guyana has started binding dispute settlement procedures under the United Nations Convention on the Law of the Sea. The new process, he said, means the two countries "will have to sit down with an arbitrator and resolve this difference and the conclusion is binding." "It certainly has a huge impact on our company," said Mr. Sully, former president of Calgary-based Ranchmen's Resources Ltd. "This is our whole focus of activity. We have no production, no reserves, no cash flow. We were specifically created to explore in this basin."

The company has significant acreage offshore of Guyana and its primary targets are in areas of overlapping border claims, he said.  CGX, listed on the TSX Venture Exchange, was drawn to the area by its prospectivity. According to some estimates, it has a resource potential of 15.2 billion barrels of oil.

In June, 2000, a jack-up drilling rig leased by CGX from a U.S. drilling contractor and operating under licence from the government of Guyana was forced off its Eagle drilling location by gunboats from the Surinamese navy. Mr. Sully said his company was given 12 hours to ship out, or face the consequences. CGX had paid $4-million to bring in the rig from Italy , he said. The company spent much of the past four years trying to get the dispute settled.

In a statement, the company said the initiative was announced on Wednesday by Guyana 's President, Bharrat Jagdeo, in a nationwide address to the Guyanese people where he accused the Suriname government of taking "aggressive action to frustrate the exploration of exploitation of our hydrocarbon resources." "For one developing country to do so to another is hard to understand. But it is worse than that because it is also a self-inflicted wound -- Suriname 's development prospects are blighted also," Mr. Jagdeo said in his speech.

Guyana said it is represented by a team of international lawyers, including Sir Shridath Ramphal of London , former Commonwealth Secretary General; Mr. Paul S. Reichler, a Partner in Foley Hoag LLP, of Washington , D.C. ; and Dr. Payam Akhavan, a Senior Fellow at Yale Law School .