Guyana owes ExxonMobil annually more than what it earns

Aug 18, 2021 News

…as ongoing exploration drives up recoverable costs —Sanzillo

Kaieteur News – ExxonMobil Guyana is currently producing oil from the Stabroek Block but with exploration costs being 100 percent recoverable in addition to other categories of spending, it means that the oil company’s annual take currently far exceeds the total revenues to be had annually.
The remaining unrecovered balance is carried over each year. It is generally assumed that as each year passes. This according to Director of the Institute for Energy Economic and Financial Analysis (IEEFA), Tom Sanzillo, who in a recent report reviewing Guyana’s future earnings from its offshore oil production laments that the total recoverable costs are currently far in excess of annual gross revenue from production.
A portion of gross revenue goes to retire development costs in addition to paying for operations and profit. Compounding the situation, it was noted by Sanzillo that while the current development costs can be recovered by 2028, the contractor has announced on a fairly regular basis that it has made new discoveries.
As such, “how the cost of these discoveries is factored into the overall project accounting is not publicly available, but Guyana will need to approve these costs for reimbursement.”
At the point when all of these costs are satisfied, Guyana’s gross profit oil is equal to 50 percent of gross revenue after expenses.
Based on currently available public information, the IEEFA Director noted that if oil is $50/barrel on average, Guyana’s take could rise to US$6.1 billion annually by 2028. “This is an increase of significant proportions when compared to the first 15 months of production, which have generated $344.1 million for the country. It is at this point—when all development costs are satisfied—that the project could produce sufficient revenue so Guyana could begin to close its deficit, reduce debt, increase spending and invest in a sovereign wealth fund.”
It was noted however that the actual development plan for the Stabroek Block is to make more investments, “in fact, additional costs are already being incurred for more exploration.”
To this end, Sanzillo observed, “these additional development costs will be added to the total development costs and push back the date when the country will receive payments in the $6 billion per year range.”
According to Sanzillo, robust annual revenue payments to Guyana will be delayed as additional development costs are added to the cumulative unrecovered balance and that “the actual number of years until Guyana receives more robust profit oil payments is uncertain. For Guyana, actual total development costs are unknown.”
According to Sanzillo, 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.

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