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Guyana is Exxon’s gold

Sep 08, 2020 Letters

Dear Editor,

Exxon is in serious financial trouble since the collapse of oil prices from $80 to just over $40 today. Exxon was forced to dump its assets on the world market in order to salvage the company. Exxon Guyana is the giant multinational’s most profitable investment. Because of Guyana, Exxon is staying afloat. The company will not sell off its Guyana asset – the profits from Guyana are enormous, the highest for an investor in any part of the globe. Never in history has a company been given such sweet deal signed by APNU+AFC that burdens Guyanese for generations to come. The Ali administration is asked to fix this big problem it inherits. How can it be done without violating sanctity of contract? There are ways with breaking the contract. One has to be patient with the government that is reviewing the Payara project.
Since oil price collapsed from US $80 to US$40, Exxon has lost a lot of money. Guyana ’s cost is about $30 although experts say it may be less if proper auditing and accounting is done. There are large deposits of oil and gas under the seabed. So Exxon will be making lost of profits for years to come as long as oil trades at above $30 and oil is not expected to dip below $30. It dipped briefly earlier this year in unusual circumstance of pandemic. Exxon has no risk investment in Guyana which is the most profitable exploration for Exxon. It is not costing the company any money because it is recovering the costs very quickly frontloading deduction of expenses..
Guyana’s profit sharing and royalty is 14.5%. Exxon gives Guyana roughly four million barrels oil to cover 14.5%. Exxon gets 85.5% for its costs and profits. Exxon’s equivalent is 23.6M barrels. Guyana sold its first three shipment or 3 million barrels for US$135M with the remaining 1 million expected to fetch another $40M. Guyana ’s total income is expected around $175M for the year. Exxon is expected to collect 23.6 million barrels for its 85.5%. At an average price of oil at $47 a barrel for 2020, Exxon is expected to generate revenues of US $1 billion and 32 million for this year alone. That is a profit of over US$200M. When production is expected to ramp up to 250K a barrel a day next year, revenues would double.
The company should unilaterally consider increasing royalty and or profit sharing percentage to Guyana. It must also increase local content to at least 65% to increase contractual services from among Guyanese so that they can also be beneficiaries in employment and contractors can get some revenues.

Yours truly,
Vishnu Bisram

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