Exxon’s home State reaps record oil tax revenues

Jul 09, 2022 News

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…as Guyana loses out by agreeing to pay companies’ taxes

 Kaieteur News – The world in recent weeks have been experiencing record high oil prices which has in turn led to those taking taxes from oil companies to register record high tax revenues a far cry from the state of affairs in Guyana.

According to reports, ExxonMobil home state in the US, among the highest earners in the Texas oil and natural gas industry, continues to pay the lion’s share.

The industry is not only leading the U.S. in oil and natural gas production, it also continues to break records in the amount of taxes it pays and the number of jobs it creates.

In June, the state collected the highest amount of monthly remittances from the Texas oil and gas industry in history, according to a new report published by the state comptroller’s office.

June’s remittances alone – a total of US$1.12 billion – were greater than the average annual revenue from oil and natural gas production taxes at US$1.01 billion just a few decades ago.

Texas oil producers remitted US$679 million in June, the highest monthly collection on record, up 87 percent from June 2021.

The majority of sales tax revenue remitted to the comptroller’s office is based on taxes paid during the previous month. June’s report covers May sales tax totals; May’s report covers April’s sales tax totals.

“All Texans benefit from a robust oil and natural gas industry that provides hundreds of thousands of good-paying jobs and pays billions towards our state’s economy, essential services and public education whether you live in the oil patch or not,” Todd Staples, president of the Texas Oil and Gas Association, said.

According to Staples, “these historic job and tax revenue numbers continue to signal the resiliency of our industry, which is committed to meeting our energy needs, fortifying our national security, and achieving continued environmental progress.”

June broke May’s previous record high.

Oil producers paid US$595 million in taxes in April, according to May data: natural gas producers paid US$413 million, the highest monthly collections on record until they paid more the next month.

The May numbers represented a record 64 percent increase remitted by oil producers and 216 percent by natural gas producers compared to the same time period a year ago.

“Despite President [Joe] Biden’s delusional desire to transition away from fossil fuels, Comptroller Hegar’s announcement reinforces the fact that oil and gas literally fuels every facet of our lives from energy to food and beyond,” Railroad Commission Chairman Wayne Christian said.

In Guyana, however, where daily oil production is now in excess of 200,000 barrels per day, under the Production Sharing Agreement with ExxonMobil Guyana and their partners for the Stabroek Block, the country agreed to take on that responsibility.

Under the arrangement, it would mean that Guyana is in fact losing out on the taxes being had by others, since by agreeing to pay the oil companies tax, this is essentially foregone revenue.

In fact, in the first year of oil production in Guyana, the country in fact agreed to take on responsibility for taxes more than what it collected in royalty that year.

According to recent financial statements filed by the domestic subsidiaries for US parent companies—Esso Exploration and Production Guyana Limited (EEPGL), Hess Guyana Exploration Limited and CNOOC Petroleum Guyana Limited, the income taxes to be paid by the oil companies in the first full year of production, accumulated payments of $5,751,060,980 or about US$27,552,901.83.

The country in 2020 collected some US$184.9 million in profit and US$21.2 million in royalty for a total of US$206 million.

As such, it would mean that government agreed to pay to the Guyana Revenue Authority, more money than it received in royalty payments for that year representing payments made on behalf of the oil companies.

Guyana under the PSA pays that amount out of its share of oil had.

According to the Financial Statements filed, Hess Corporation listed as its Income Tax expense, some $G1,725,318,294 or US$8.3 million  for its 30 percent interest in the Stabroek Block.  As such, it would bring the total amount owed to GRA to be G$5.7B or about US$21.2M meaning ExxonMobil’s 45 percent interest would rack up payments of some G$2,587,977,441 or US$12.4M and CNOOC petroleum Guyana Limited G$1,437,765,245 or US$6.9 million on its 25 percent interest in the Stabroek Block.

Under the PSA at Clause 15.4, (a) it stipulates that the Minster of Natural Resources agrees that a sum equivalent to the tax assessed to be paid by the Minister to the Commissioner General of the Guyana Revenue Authority (GRA) on behalf of the contractor—ExxonMobil Guyana – and that the amount of such sum will be considered income of the contractor.

Additionally, at 15.4 (b) the Minister also agrees that the appropriate portion of the Government’s share of profit oil delivered, shall be accepted as payment in full for the contractor’s share of Income Tax and Corporation Tax—levies owed to the GRA.

The Stabroek Block is currently being developed by two Floating Production Storage and Offloading (FPSO)—the Liza Destiny and Unity and the Liza I and II developments—and collectively the oil companies are set to rake in just under US$9B.

The Liza Phase I development, which began production in December 2019 using the Liza Destiny FPSO with a production capacity of approximately 120,000 gross barrels of oil per day.

Recently completed production optimisation work expanded its production capacity to more than 140,000 gross barrels of oil per day.

The second development, Liza Phase II, utilises the Liza Unity FPSO, which began production in February last and is expected to reach its production capacity of approximately 220,000 gross barrels of oil per day by the third quarter.

A third development is expected to come online in late 2023, utilising the Prosperity FPSO  followed by the Yellowtail field, expected to come online in 2025 with the ONE GUYANA FPSO.

At least six FPSOs with a production capacity of more than one million gross barrels of oil per day are expected to be online on the Stabroek Block in 2027, with the potential for up to 10 FPSOs to develop gross discovered recoverable resources.

Guyana’s Stabroek Block is 6.6 million acres (26,800 square kilometres). ExxonMobil affiliate Esso Exploration and Production Guyana Limited is the operator and holds 45 percent interest in the Block.

Hess 30 percent interest and CNOOC Petroleum Guyana Limited holds 25 percent interest.

 

 

 

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