Stabroek Block raked in US$9.8B last year, but Exxon deducted US$7.4B in costs

Jun 20, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – Financial details emerging from the multinational oil corporation operating in the country’s largest oil basin, the Stabroek Block, has highlighted the lopsided nature of the contract signed by government in 2016.

According to the 2022 Annual Report from Esso Exploration and Production Guyana Limited (EEPGL), the 26,800 square kilometer (6.6 million acres) oil block, raked in a gross revenue of US$9.8 billion. Currently, EEPGL commonly referred to as ExxonMobil Guyana is producing oil from two projects there, the Liza One and Two.

EEPGL President, Alistair Routledge

From its gross revenue, ExxonMobil deducted a whopping US$7.4 billion towards the recovery of its investment for the petroleum related activities. The recovery of these costs is provided for in the Production Sharing Agreement (PSA) Guyana inked with the oil company and its partners, Hess and CNOOC. The agreement stipulates that up to 75 percent of the total production from the contract area each month can be recovered. Costs not recovered in a particular month will be added to the next month’s charge.

Notably after 75 percent of the costs are deducted to repay Exxon, the remaining 25 percent is then shared equally between the government and the oil company. This means that 12.5 percent of the revenue goes to Guyana, while the second 12.5 percent profit is shared with the company. Exxon is then required to pay the country two percent from its share towards royalty.

EEPGL President, Alistair Routledge said in the Report “Our continued investment through the COVID-19 pandemic and associated commodity price crash of 2020-2021 positioned us to benefit from the price recovery in 2022. We delivered over 100 million barrels of production from the Liza Destiny and Liza Unity Floating Production Storage and Offloading vessels (FPSO’s), generating gross revenues for the block of US$9.8 billion.”

He added, “This enabled recovery of US$7.4 billion of costs.” Guyanese against the contract signed with Exxon have protested the high cost recovery ceiling, but as with other aspects of the agreement, the government maintains that the provision will not be changed. Instead, the Guyanese leaders have drafted a new PSA which will govern its other oil blocks. It has proposed to cap the cost recovery rates at 65 percent, securing an additional 10 percent of revenue for Guyana. It must be noted however that the 14 blocks which these terms will preside over have not yet discovered a drop of oil; meanwhile the Stabroek Block where over 11 billion barrels of proven reserves have been found will continue shackled to the existing provisions.

Exxon and partners are expected to bag huge profits this year as the Payara Development Project will hit first oil this year. It will work alongside the Liza Phase One and Liza Phase Two Projects, all of which are expected to produce approximately 600,000 barrels of oil equivalent resources. Already, five projects have been approved in Guyana while the company is eyeing a sixth development in the oil- rich Stabroek Block.