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Suriname gets almost three times Guyana’s revenue share from oil deal
The Republic of Suriname is lucky to have benefitted from three consecutive oil discoveries made this year by Apache and Total, all within the confines of Block 58 – a concession located near its border with Guyana.
However, the revenue share that the people would get from the production of the oil in that block is due not to luck, but to the prudent management of the patrimony of the people of Suriname by its Government.
Former Managing Director of Suriname’s state oil company, Eddie Jharap, recently calculated that the probable revenue share would be 36 percent of gross production. This is noteworthy as Guyana is set to get a 14.5 percent revenue share from gross production revenues on its Stabroek Block. Despite the fact that Guyana’s Stabroek Block is much more lucrative, Suriname’s revenue share would amount to almost three times that of Guyana.
Map showing location of Suriname’s Block 58 and Guyana’s Stabroek Block
Jharap provided a simple arithmetical calculation of this on Saturday last. First off, the royalty for Block 58 is 6.25 percent of gross revenues, which is more than three times Guyana’s meager two percent.
Aside from the payment of royalty, the operational costs of about 20 percent of gross production are to be paid, Jharap explained. He also pointed out the investment costs during the first five years, which would be about 20 percent of oil production per year.
The remaining 53.75 percent of the gross production is referred to as profit oil. As a concession holder, the state company, Staatsolie, obtains 16 percent of gross production free of charge.
Of the remaining 37.75 percent profit oil, the investors are to pay 36 percent income tax to the State of Suriname, which amounts to about 13.59 percent of gross production. A summation of royalty, Staatsolie’s share, and income taxes amounts to 35.84 percent of the gross production.
Jharap said that Staatsolie also has an option to participate up to a maximum of 20 percent with investment capital, in which case, Suriname’s share of the production would move from 35.84 percent to 43.39 percent of gross production.
In Guyana’s case, the investors recoup their investments by up to 75 percent of gross production, leaving 25 percent as profit oil. The profit oil is split 50-50 between them and the government. The oil companies pay no taxes. The government also receives two percent of gross production as royalty. Half of profit oil gives Guyana 12.5 percent of gross production. Added to a royalty of two percent, Guyana’s total revenue share is 14.5 percent of gross production.
Many have criticised Guyana’s contract with ExxonMobil as lopsided and unfair to the people. Global Witness has calculated that the poor terms would cause Guyana to lose US$55B over the life of the contract. It has criticised Guyana’s leaders for the part they played in the signing away of the massive concession to the multinationals, ExxonMobil, Hess and CNOOC.
Despite facing international and local condemnation, neither of the major parties has shown interest in securing better terms for the people. ExxonMobil has even boasted that it has received assurances from the parties that the contract will remain intact, and that its projects will be allowed to move forward.
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