Exxon to hand Guyana another US$2B in bills over next three years

Jun 21, 2022 News

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– on leases, capital purchases for Stabroek Block

Kaieteur News – Esso Exploration and Production Guyana Limited (EEPGL)—ExxonMobil Guyana—plans to spend G$276,434,609, 999 or US$ 1,382,173,049 on operating leases and capital projects or new purchases for this year.

The amount identified by EEPGL for spending on the two categories this year, is included in the items that have been earmarked to be recovered by cost oil meaning Guyana’s oil in the Stabroek Block would be used to make the repayments. The commitment, according to ExxonMobil, for the two categories of spending for this year is pegged at some G$276,434,609,999 or US$1,382,173,050, the next year 2022, accounts for some G$117,137,451,862 or US$585,687,259 and in 2024 G$8,655,139,808 or US$43,275,699 and thereafter G$18,805,838,338 or US$94,029,191.69. Altogether, EEPGL has earmarked some G$421,033,040,007 or US$2,105,165,200,035 in the near future. The amounts would represent sums to be deducted as part of the recoverable expenses. This publication over the weekend had reported that just one of the thousands of costs for the ExxonMobil Guyana’s oil project in Guyana is costing the country more than half of what it is earns in profits and royalty from. That single deduction relates to the decommissioning or clean up exercise to be undertaken some 18 years from now.

According to the financial statements recently released by ExxonMobil Guyana, the deductions over the last two years amounts to some US$355.7M, while the total earnings for the country from the Stabroek Block during the same period was some US$607M. EEPGL last year generated some US$12B in revenue while the country collected some US$458M, accounting for its share of Profits and the Royalties earned for the entire year. The company’s after tax profit for that year was recorded some US$634,936,435 or G$132.1B with its total operating expenditure which is recovered from cost oil for ExxonMobil Guyana at US$586,783,567 or $123B.

Juxtaposed with the earnings of the entire country through taxes and other revenue streams including its earnings from the Stabroek Block—US$458M—it would mean that the EEPGL—ExxonMobil Guyana—operations last year earned more than the entire country put together.
In 2021, Guyana earned as a country, a total of US$1,690,115,384, or G$351.5B.
It would mean that the Stabroek Block production in fact generated more income than the country collectively.

In 2020, the country had earned for itself US$149M in Royalty and Taxes. As such, it would mean that for the two full years of oil production, the county earned for itself, some US$607M.
Just one of the costs deducted from ExxonMobil Guyana— decommissioning is pegged at a whopping US$355.7M or considerably more than half of the country’s total earnings for the entire year. Based on its 2021 financial statements, EEPGL recovered $15.2B in 2020 and $17B in 2021 for decommissioning costs associated with the Liza One Project. It therefore means that its total take for the two years was US$160M.

Its partners also recovered monies too. Though their financial results have not been made public as yet, Kaieteur News was able to calculate their take based on the percentage of working interest they hold in the Stabroek Block. With Hess’ 30 percent stake, it recovered approximately US$106.7M while CNOOC’s 25 percent working interest would be equivalent to US$89M being recovered for decommissioning.

Under the deal signed—the Production Sharing Agreement—the company has been taking out money from day one of production to set aside as a decommissioning fee.

This publication had previously reported that ExxonMobil Guyana has in fact been utilising that money which is being deducted from cost oil. When confronted with the report recently, Vice President Bharrat Jagdeo had told reporters, however, “It’s not like Exxon would put the money in there and leave it; the funds are fungible so to the extent that it is utilised and it reduced the cost of say borrowing which is ultimately a cost to be borne by the company then ultimately that would be seen as productive use.”

He said, “…if they use it for private purposes alone then that would not be seen as a productive use.” It has since been noted that such a situation meant that ExxonMobil is currently deducting money from cost oil for decommissioning at the end of the lift of the project—in another 15 years—and would have been using the money on the project, which is then deducted with interest again, as a loan that has to be repaid by the company.

It has been estimated by international experts that throughout the life of the project, in excess of US$3B would be deducted from cost oil to go towards the decommissioning of the project.
Poignantly, ExxonMobil is yet to develop a decommissioning plan for any of its project and has in fact signaled its intention to abandon all of its subsea equipment on the sea floor and that it is expected that the production ship—the Floating Production Storage and Offloading Vessel—the Liza Destiny and others, would be towed away.

 

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