Govt., oil companies united in keeping cost recovery numbers hidden

May 29, 2023 News

Kaieteur News – With recent revelations about the outsized profits of Exxon, Hess and CNOOC in 2022, more concerns have re-emerged about the shroud of secrecy those companies and the government of Guyana have cast over cost recovery for the Stabroek block.

With the super high 75% cost recovery ceiling of the Stabroek Block production sharing agreement (PSA), Exxon and its partners are able to recover their investments into offshore projects at a remarkable pace. However, this has resulted in the three Stabroek block companies being able to report outsized profits amounting to a collective US$5.9 billion in 2022 alone, while Guyana’s total revenues from more than three years of oil production are only US$2.4 billion.

When will Guyana’s share increase? The public is often told that one day, the Stabroek Block partners will recover their costs, resulting in more profit oil for Guyana; hence, more revenues into the Natural Resource Fund. But, like the coming of Jesus, whenever that day is, the public does not know.

Writers in Kaieteur News’ letter pages have attempted to determine when Guyana’s share would increase. One writer projected, for instance, that the equivalent of investments made into Exxon’s Liza Phases One and Two projects could be recovered before December 2024. However, the lack of ringfencing in the PSA has complicated the matter even more. Because Exxon’s Stabroek block projects are not ringfenced, the partners are able to recover investments made into Exxon’s later projects before they even begin to produce. Hence, in addition to the nearly US$10 billion investment into developing the Liza field – when that cost is recovered – they can start recovering the more than US$30 billion in combined development expenses of the Payara, Yellowtail and Uaru projects.

Further, because Exxon is practically adding a new project every year, each addition of expenses stretches the period of cost recovery out even more. Exxon also has other costs to recover, such as spending to drill exploration wells, which is happening every year. Exxon will be exploring 10 wells in 2023 alone. Unlike the estimates published for the developments, neither Exxon nor the government has been forthcoming about how much is being spent to explore those targets.

Exxon’s country president in Guyana, Alistair Routledge, said in February that Exxon had recovered investments that would be equivalent to the original investment for Liza One. He said also that significant progress has been made in terms of repaying the investment on 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. This newspaper’s multiple perusals of those documents have uncovered no statements about cost recovery.

The Vice President, Dr. Bharrat Jagdeo, has placed his seal of approval on the effort to keep these numbers under a veil of uncertainty. When asked by this newspaper to publish information in this regard, the Vice President said, “A lot of this is proprietary but in this environment and with an organization like Kaieteur News, I would never want to release that because they will nitpick, they will take one word out of it and create a story and lie about it.”

He said further that intermediate reports are not being released to the media anywhere in the world, implying that government is being guided by this precedent.

Dr. Bharrat Jagdeo, Exxon’s later projects before they even begin to produce, Stabroek block production sharing agreement (PSA)

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