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KEPT IN THE DARK
Public, press, transparency advocates have no access to Exxon’s exploration, development costs for seven years
– Regulators continue to hide oil company’s annual work programme, budget
– Two cost recovery audits still pending
Kaieteur News – Oil companies carted off almost 90% of the oil produced offshore Guyana last year, due to a 2016 deal described as ‘sh**ty’ by Guyana’s Vice President, Dr. Bharrat Jagdeo. The deal allows ExxonMobil and its partners to recover costs up to a ceiling of 75%, in the form of lifts categorized as cost oil.
Many times, when this deal is criticized, Guyanese are told that their take will increase soon, when cost recovery is completed. But the Guyanese people do not know when that day will come. While the People’s Progressive Party (PPP) Government is regularly furnished with reports on costs by oil companies, the administration has not shed light on its projections.
Stabroek Block
The public, the press and transparency advocates have no access to reports that outline neither the costs ExxonMobil is submitting to the government nor the rate at which they are being recovered, despite countless calls for these details to be made public.
So far, the public has been told that the Liza Phase One project had an initial estimated cost of US$4.4B but which later reduced to US$3.6B. After Liza Phase One, there is the US$6B Liza Phase Two project, the US$9B Payara project, and the US$10B Yellowtail project. However, no indication has been given of how the actual costs of these projects measured up against Exxon’s initial estimates. When the Uaru project is approved, this will add US$12.7B.
In a few months, another tremendous cost estimate will be added to the pile when Exxon reveals a number for the Whiptail project. This will all be added to the billions of US dollars being spent to drill exploration wells offshore Guyana. The government does not tell the public how many wells have been drilled, nor does it reveal the costs.
To share the crude oil amongst all parties, a lift of oil is not literally divided up based on the calculated takes, because this would be impractical. Instead, each party (Exxon, Hess, CNOOC and government) receives a number of lifts over an extended period which should end up roughly equivalent to the take each is owed.
For example, in 2023, government expects that out of 136 lifts (each comprising approximately one million barrels), Guyana is owed 17 lifts. These 17 million barrels represent Guyana’s profit oil lifts. While the Maritime Administration Department (MARAD) puts out a notice when each lift is to be transported from the floating production vessels, there is no indication whether the lift has been earmarked for one of the companies or the government. There is also no forthcoming formula from the government, which would allow the public to independently determine to whom each lift is going.
As stipulated by the Stabroek Block Production Sharing Agreement (PSA), ExxonMobil’s local subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), is required to submit its annual work programme and budget to the government. Regulators have never made these reports public.
The government has an implicit obligation to conduct regular audits of these costs as submitted. Guyana took years to finally order its first cost audit for Exxon’s pre-contract costs in 2020. But various hiccups and delays have resulted in a great deal of public confusion over the final results of the examination of the US$1.6B in costs. The government also issued a contract in 2022 for the audit of US$7.3B in additional costs. The final report on this audit is expected in March. But while promises have been made that the results will be made public, similar promises of this nature by the government have not been fulfilled.
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