Latest update November 5th, 2024 1:00 AM
Oil market crisis… Guyana would still get US$250-300M from first year of oil if royalty is at fair 15% – Dr. Jan Mangal
Former Petroleum Advisor to the President , Dr. Jan Mangal has said that Guyana would still get a substantial revenue share from oil even when the price is sent crashing, once royalty on every barrel is set at a fair level of 15 percent.
Petroleum Consultant, Dr. Jan Mangal
He made these and other comments in a recent Facebook post.
Initially, it was projected that 2020 would see Guyana getting about US$300M in revenue from the two percent royalty, and 50 percent profit share after costs are recovered by the oil companies.
Attorney-at-Law Charles Ramson Jr. had later revealed to Kaieteur News that the crisis in the oil market, which caused prices to crash, has severely cut down Guyana’s short term revenue share. He had said that when Guyana calculated its take from the Liza project, calculations were done using the US$55 a barrel oil price. But the oil price has dropped so far that Bloomberg yesterday had the price of Brent crude at less than US$25 a barrel.
The crash is due to fear of the coronavirus and a continuing oil price war between Russia and Saudi Arabia.
Dr. Mangal said “Guyanese are worried that the crash in oil price means they will receive much less than the initial estimate of US$300M in the first year.”
“Correct, the worry is justified,” Mangal added.
Guyana has already collected almost US$55M from oil production in the Stabroek Block, but that benefit was gained before the effect of the oil market crisis set in.
Dr. Mangal explained that Guyana’s share for the year would still total in the vicinity of US$250-US$300M if the royalty is set at a fair 15 percent.
“This is why royalty is so important to countries like Guyana.”
Minister of Natural Resources, Raphael Trotman had negotiated a royalty of two percent, with ExxonMobil and its partners for the production of oil in the Stabroek Block, among a series of provisions widely criticized as lopsided and unfair to Guyana.
Kaieteur News had learnt from a report by Wall Street Journal that Trotman ignored expert advice on multiple occasions to demand 10-15 percent royalty.
Both major parties have been urged to renegotiate the Stabroek Block production sharing agreement with ExxonMobil, as well as other oil contracts.
Dr. Mangal said, commenting on the current political situation, that “an illegitimate government has no chance of renegotiating with Exxon. We need a legitimate and strong government which the people support.”
As it stands, the results released by Guyana Elections Commission (GECOM) have been adjudged by political parties and electoral observers as not credible.
Guyana has been urged by the international community to avoid swearing in a president, and by extension a government, on a flawed result.
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