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Guyana pays more interest on loans than it earns in Profits & Royalty
…analyst projects paying US$336M this year, as Govt. gets US$226M total
Kaieteur News – A recently published financial analysis has since revealed that the interest rate on the loans that Guyana is ultimately responsible for repaying through cost oil, that were taken by Esso Exploration and Production Guyana Limited (EEPGL) amounts to more money that the country will receive this year for its royalty and profit share combined.
Director of Financial Analysis : IEEFA, Tom Sanzillo
At least, this is according to the projections, provided by Tom Sanzillo, Director of financial analysis for the Institute for Energy Economics and Financial Analysis (IEEFA)—specialising in the oil, gas, petrochemical and coal sectors.
The nation has been in the dark for several years with regards the interest rate that is being paid on the loans contracted by the Stabroek Block operator but the rate has remained elusive with government and other officials remaining tightlipped. The requests have been repeatedly made publicly by this publication and several local and international experts and watchdog bodies.
Sanzillo, in a recent analysis of the economics behind the Stabroek Block developments noted that on the interest alone that is being paid by the company through recoverable cost oil, the country prior to 2020 paid US$143M.
For 2020, according to Sanzillo, interest on loans accounts for US$229 and this year, he projects the amount to be some US$336. Guyana’s total share from production in the Stabroek Block is projected at US$226M, a difference of US$110M.
Based in his projections, by 2024, Guyana would have had to repay some US$2.8B on loans for projects that had been approved up to July this year—the month the analyst report was published. According to Sanzillo, next year, he is projecting that the payments for interests would amount to some US$488M, while the country’s total take for that year would be US$434M or US$54M less.
For 2023, Sanzillo projects government’s total share to increase to US$905M while the US oil major will utilise some US$661M from cost oil to use for interest on loans.
In 2024, the financial analyst predicts total earnings for Guyana to be US$1.3B while the interest payments alone for that year would amount to US$946M.
The total recoverable costs, according to Sanzillo, are currently far in excess of annual gross revenue from production. He observes in his analysis that a portion of gross revenue goes to retire development costs in addition to paying for operations and profit and the remaining unrecovered balance is carried over each year.
“It is generally assumed that as each year passes, new wells (Liza Phase 2 and Payara) could be added and revenues grown commensurately.”
It was noted too that robust annual revenue payments to Guyana will be delayed as additional development costs are added to the cumulative unrecovered balance.
“The actual number of years until Guyana receives more robust profit oil payments is uncertain, “he said and pointed out that “for Guyana, actual total development costs are unknown.”
It was noted too that the contractor has not disclosed the total development costs for Payara or the total development costs needed to reach the maximum amount of extractable oil.
“In addition, there have been no mutually agreed-upon, publicly available oil price projections, a key factor in estimating the rate and level of cost recovery,” the analyst said.
The Guyanese government has decided to accumulate the oil payments, according to Sanzillo, who observed that as of April 13, the country had collected US$344M, “how the government plans to use the proceeds remains to be seen.”
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