ExxonMobil no stranger to evolution of fiscal terms … Oil Company ready to “evolve” with the country - Brasington

ExxonMobil no stranger to evolution of fiscal terms … Oil Company ready to “evolve” with the country – Brasington

Jul 19, 2018 News

By Kiana Wilburg
Once a country has been able to establish that it has proven oil reserves, then its highly investor-friendly contractual terms would have to change.
In a recent interview with this newspaper, former head of ExxonMobil’s Public Relations Department, Kimberly Brasington acknowledged this fact. She said, too, that her company like many other oil operators is no stranger to this sort of “evolution.”
Brasington said, “We have seen this in Brazil when their pre-salt discoveries happened. There were some existing terms for operators to get in and prove that it is there…but since it was found, now people who want in, and people who are in it, they have to get completely different terms. The terms evolve. ExxonMobil is accustomed to this. We do this around the world in frontier and mature nations and we are there for decades. …”
She added, “We are in the very early days of this. We are looking at 30 to 40 years into this relationship and it will have to be what is right for not just Exxon but Guyana.”
Kaieteur News then asked Brasington if her company would be ready and comfortable with the evolution of fiscal terms for the Stabroek Block as the project progresses.
The Exxon official said, “I mean, I wish I could be comfortable saying that to you. In my heart, yes, we as a company will grow and evolve with the country.” She declined to comment further on this front. Brasington noted, however, that it was the International Monetary Fund (IMF) which was the first to point out that with the progression of the Liza Project, fiscal terms will have to be improved for Guyana.
IMF CONCERNS
The IMF in one of its reports to the government highlighted several areas of concern in the Guyana-ExxonMobil contract which it says must be addressed so that the government’s take can be increased.
The 72-year-old institution said that Guyana must hasten moves to revise the current framework of its Production Sharing Agreement (PSA). Specifically, the IMF said, “Introduce a revised production sharing mechanism for new PSAs that provide the government with a higher share of profit oil as the profitability of projects increase.”
The IMF said, too, that the government should apply tighter ring fencing arrangements to its contracts. This ensures that an oil operator cannot transfer the expenses incurred at one well to another. The IMF said that in principle, the ring-fencing arrangement ensures that the government’s revenue from the Stabroek Block is calculated based on each field or well separately. In the absence of this provision, the IMF said that Guyana’s take could be affected.
In addition to this, the IMF reported that the ExxonMobil PSA has the lowest Average Effective Tax Rate (AETR) of all the fiscal regimes evaluated.
The Fund said this result confirms that the terms offered in the agreement are generous to the investor.
The IMF recommended that Guyana move quickly in the direction of countries that have fine tuned their fiscal regimes. The Fund said that Guyana’s tax framework needs to be urgently improved.

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ExxonMobil no stranger to evolution of fiscal terms … Oil Company ready to “evolve” with the country – Brasington

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ExxonMobil no stranger to evolution of fiscal terms … Oil Company ready to “evolve” with the country – Brasington

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