Latest update January 18th, 2025 2:31 AM
ExxonMobil to deduct over US$220M by 2024 for works to be done 20 years in the future — Financial Analyst
By Kiana Wilburg
Kaieteur News – By the end of 2024 — two years from now—ExxonMobil Guyana would have already recovered some US$227M for works to be executed 20 years into the future. These monies, which would be deducted in portions annually, are associated with the abandonment or decommissioning of its wells for the Liza Phase One Project. Such costs are allowed to be recovered by the Operator, Esso Exploration and Production Guyana Limited (EEPGL), as per arrangements in the 2016 Stabroek Block Production Sharing Agreement (PSA).
Financial Analyst, Tom Sanzillo
This notable payment schedule is documented in a report authored and produced by Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo.
According to his analysis, even before 2020, EEPGL had already deducted US$1M, and that was raised to US$16M by the end of that year. For 2021 EEPGL, according to Sanzillo, deducted some US$18M as part of its annual recoverable expenses for abandonment costs.
By the end of 2022, the company will deduct an additional US$32M which then doubles in the following year –2023—to US$64M. In 2024 EEPGL will deduct from oil sold from the Stabroek Block up to US$95M for a total of US$227M to be deducted as Amortised Abandonment Costs—works to be undertaken some 20 years in the future at the projected end of the lifespan of the Liza 1 oilfield.
Decommissioning is the process of ending offshore oil and gas operations at an offshore platform and returning the ocean and seafloor to its pre-lease condition. This would involve the removal of all of the subsea installations such as manifolds, pipes and valves in addition to the resealing of the exhausted well. There will be some 17 wells to be decommissioned at the end of the anticipated 20-year life span.
This publication previously reported that by the end of 2024 ExxonMobil and its partners Hess Corporation and China National Offshore Oil Company are set to rake in some US$42.7B in profits, and deductions for interest on loans, abandonment costs, profits and annual operating expenses, among other deductions, from the oil being produced in the Stabroek Block.
Guyana by contrast will have received by then a total of US$3.3B, US$633M of which would be used to pay taxes on behalf of the contractor, ExxonMobil Guyana.
It would mean that the oil consortium currently operating at the Liza I oilfield’s take would be some 85 percent of the projected 555 million barrels of oil scheduled to be produced from the Stabroek Block during that period—representing recoverable costs such as expenses and profits.
Guyana’s take during the same period in contrast, sees the country earning some US$3.7B total, of which US$523M accounts for royalty earned. Of its total take, however, US$653M would represent taxes being paid by Guyana on behalf of the US oil major operating in the Stabroek Block. Total royalty for its oil for Guyana at the end of 2024, is pegged at US$523M or $100M less than what the country will take from its share, to fork over to the treasury as taxes—foregone revenue from ExxonMobil Guyana.
These are among some of the startling revelations documented in the analysis conducted by Sanzillo.
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