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Despite paying off Liza 1 expenses, Guyana still collecting meagre 12.5% profits from its oil due to lack ring-fencing
Kaieteur News – Guyana has managed to pay back ExxonMobil and its partners, Hess and CNOOC, approximately US$4 billion for developing the Liza Phase One offshore project.
Under normal conditions, with ring-fencing, the country would have now been reaping 50 percent of the profits from that project, but in the absence of this key provision, Guyana will continue to receive a meagre 12.5 percent in profits.
Guyana’s first Floating Production Storage and Offloading (FPSO) vessel, the Liza Destiny
Country Manager for ExxonMobil Guyana, Alistair Routledge in response to a question from Kaieteur News yesterday said that the project’s expenses have been cleared.
He explained, “On Liza, it all goes into the same cost bank but we have now recovered cost that would be equivalent to the original investment for Liza Phase One.”
Routledge also pointed out that significant progress has also been made in terms of repaying the investment on the second deepwater project, Liza Phase Two. He could not state how much has been paid off to date but noted that these details would be included in the company’s financials that should be released in another few weeks.
Presently, Guyana shares revenue with ExxonMobil after the company deducts 75 percent towards the cost incurred to develop the resources in the Stabroek Block. This arrangement, with the lack of ring-fencing, sees Guyana paying for projects that are yet to commence production activities.
Each month bills from future producing developments are added to the list of expenses to be cost recovered by Exxon. After the 75 percent is deducted to pay back the oil company, Guyana then shares 50/50 of the 25 percent remaining with Exxon as profits. This amounts to 12.5 percent of profits from the operations.
A passionate and almost angry Bharrat Jagdeo while functioning as Leader of the Opposition, just over three years ago, said in an interview that the then A Partnership for National Unity + Alliance For Change (APNU+AFC) Coalition government “sold” the country to “foreigners” because that administration failed to include ring-fencing to shore up profits from the 2016 Production Sharing Agreement (PSA) with Exxon.
At that time, Jagdeo assured that when the People’s Progressive Party Civic (PPP/C) returned to office, this would be a priority when the contract is renegotiated.
“They sold us out to the foreigners. The oil companies, every time there is a find out there, our people should be sad because nothing comes our way. We are gonna renegotiate those contracts because that’s not what we had in mind,” Jagdeo said.
He added, “When we were in the early days, we were coaxing the people (ExxonMobil) to go along. They (Coalition) came into office – three billion barrels of proven reserves and they gave up zero royalties, no taxes, no ring-fencing.”
Soon after taking office in 2020, the now Vice President (VP) has not only changed his tune but also his tone when it comes to the renegotiation of the Exxon contract and securing greater benefits for Guyanese.
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