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Exxon to draw down almost US$500M in management fees for EEPGL by 2024 – Expert
Kaieteur News – Back in 2016, Guyana had a signed Production Sharing Agreement (PSA) with Esso Exploration and Production Guyana Limited (EEPGL) which holds a 45 percent stake in Stabroek Block, along with its partners Hess Corporation Guyana and China National Offshore Oil Company (CNOOC).
Director of Financial Analysis, IEEFA, Tom Sanzillo
EEPGL, is incorporated in a known tax haven — the Bahamas — with a registered office in Guyana and is the company commonly referred to as ExxonMobil Guyana — the operator for the Stabroek Block.
To date, the expenditure for which the company deducts through the sale, of as much as 75 percent of the crude produced in the Stabroek block, has in large part remained in the domain of the partners and has never been shared publicly.
A study on Guyana’s Oil and Gas industry and the economics involved by Tom Sanzillo, Director of financial analysis for the Institute for Energy Economics and Financial Analysis (IEEFA), has uncovered that EEPGL in fact pays its parent company ExxonMobil Corp.— based on Texas USA — a hefty Parent Company Overhead (PCO) fee.
A PCO fee is described in business circles as a fee charged by an operator to its co-venture partners in respect of costs of support services from its parent organisation such as Human Resources security and procurement services, and is most commonly charged on the basis of a percentage of all other sums charged to the joint account.
According to Sanzillo in his analysis, EEPGL prior to 2020 paid over US$73M in PCO fees to its parent company. Sanzillo in his July 2021 report said, that EEPGL paid ExxonMobil Corp. US$35M in 2020 and in 2021, it will fork out US$39M in PCO fees.
This year, Sanzillo predicts the fee being paid to the US based parent company will increase to US$53M and then US$64M the following year.
Slated to collect US$93M in 2024, it would mean that by the end of the next three years, EEPGL would have paid over to the Texas based ExxonMobil Corp. almost half a billion US$ in fees.
This publication had reported that Sanzillo in his findings had found too that another of the expenditures for which Guyana is being charged a hefty amount relates to the interest being charged on the loans contracted by EEPGL.
He had found that on the interest alone that is being paid by the company through recoverable cost oil, the country prior to 2020 had paid US$143M.
For 2020, according to Sanzillo, interest on loans accounts for US$229M and for 2021, he projected the amount to be some US$336M. 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 2021— the month the analyst’s report was published.
According to Sanzillo, in 2022 he is projecting that the payment for interests would amount to some US$488M. 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.
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