As Guyanese push for change of oil contract
Dec 02, 2024
—Exxon says stability critical in supporting investments in Stabroek Block
Kaieteur News- As Guyanese remain relentless in their calls for the oil contract with ExxonMobil and its partners to be renegotiated, the company has stepped up its campaign to shut down any such demand.
President of ExxonMobil Guyana Limited (EMGL), Alistair Routledge during an appearance on the Energy Perspectives Podcast aired on Sunday, said investing in confidence is always crucial to the company.
According to him, “I think what’s critical around the world to support an industry that has a long horizon for investments-20 years, 30 years plus- is stability. It’s always super important to us to ensure that we are investing with confidence, that the rules aren’t going to change, that our investors can have that ability to look out when they make an investment decision, know that it is going to materialise.”
President, ExxonMobil Guyana Limited, Alistair Routledge
Routledge pointed out that while the company takes other risks such as geological and execution, “having that consistency around the regulatory and legal environment is extremely important.”
He explained that the company plans to put six projects onstream by 2027, increasing the country’s total production capacity to 1.3 billion barrels of oil per day. Presently, EMGL, the operator of the Stabroek Block has received regulatory approvals for six projects. Three of those are currently producing an average 650,000 barrels per day, well above the expected capacity.
While this production has resulted in record earnings for shareholders of Exxon, Guyana has been receiving a meagre portion of the revenues earned from the projects. The country is also faced with greater environmental risks for which it does not have full financial protection.
A key provision not included in the contract allows Exxon to shorten Guyana’s share of profits by investing the earnings to develop projects yet to startup, and even finance the company’s exploration activities.
To date, Guyana would have been receiving a greater profit share with a ring-fencing provision, since the cost of the three projects in operation have been paid off. Despite being urged to implement a ring-fencing provision to ensure the country benefits from the current high oil prices, the government is reluctant to apply this mechanism.
In the meantime, Exxon deducts 75% of Guyana’s oil produced each month to recover cost. The remaining 25% is shared equally with Guyana as profits. The country also receives one of the lowest royalty rates known to the sector, a paltry 2% which is paid quarterly.
ExxonMobil holds 45% interest in the block, while its partners Hess Guyana Exploration Ltd. and CNOOC Petroleum Guyana Limited hold 30% and 25% respectively. The Stabroek Block is estimated to hold some 11.6 billion barrels of oil equivalent.
Since production commenced in 2019, Exxon has produced over 500 million barrels of oil. This however only translates to US$5.4B in oil revenue for Guyana, while the company has already grabbed about US$25.9 billion in costs alone. Since the agreement provides for a 50% profit split, it would be safe to conclude the oil companies have so far collected US$31.3B, over five times what the country received for its resources during the same period.
(As Guyanese push for change of oil contract)
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