ExxonMobil invested over $39B in Stabroek Block last year

Jun 26, 2023 News

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Kaieteur News – American oil major, ExxonMobil invested a whopping $39 billion in 2022 to develop the oil discovered in the Stabroek Block.

According to financial statements included in ExxonMobil’s 2022 Annual Report, a total of $39,210,542,971 was expended in the Block. This amounts to just over US$196 million.

The oil company recently told reporters that its investments are not made from loans but through equity or financing from the company. This newspaper understands that in the previous year- 2021- ExxonMobil’s equity contribution amounted to $42,259,299,744 or just over US$211 million.

Vice President Bharrat Jagdeo has been reluctant to disclose the rate of return on the company’s investments despite his responsibility to the citizens of Guyana in the interest of transparency. He dodged the issue at his most recent press conference hosted at the Office of the President on Thursday. It was reported that the VP deferred the question and provided an unrelated response.

In prefacing his comments to the specific question, the former Head of State explained, “Regardless of whether you make the financing in the form of a loan or equity you have to get a rate return. There is a cost of capital and that is how it is.”

However, when he was asked if there is a standard rate of return Guyana is paying the companies, he noted, “We are not paying anything. The Government of Guyana is not paying anything because they have to raise the financing using the best efforts; the cheapest cost of financing that is what they are supposed to do as a company, so this is what can be analyzed even when you look at the cost bank.”

He also noted that the question should be put to the oil company and he would then provide a comment.

According to the financial statements from ExxonMobil, the Stabroek Block generated a gross revenue of US$9.8 billion in 2022. Currently, Esso Exploration and Production Guyana Limited (EEPGL) commonly referred to as ExxonMobil Guyana is producing oil from two projects there, the Liza One and Two.

From its gross revenue, ExxonMobil deducted a whopping US$7.4 billion towards the recovery of its investment for the petroleum related activities. Meanwhile, Guyana benefitted from a meager total of US$1.4 billion from the activities in the Stabroek Block last year.

While the investments continue to pour in, the country’s leaders have been lagging behind on conducting timely audits of the company’s expenses. The failure on Guyana’s part to audit the books of the companies can see the nation cheating itself out of more revenue from an already lopsided oil contract.

Presently, two oil audits conducted to date for the Stabroek Block activities are yet to be finalized. Guyana’s first audit of ExxonMobil’s expenses between the period 1999 and 2017, to the tune of US$1.6 billion is still ongoing. That review was conducted by a British firm, IHS Markit. A draft report was prepared and leaked to the press, detailing that some US$214 million in costs could be disputed by the country.

Meanwhile, a second audit is currently underway for costs totalling US$7.3B which were incurred from 2018 to 2020. That contract was awarded last year May. At an engagement with the press last month, ExxonMobil said the process is currently in the comments period which allows the company to respond to the findings of the audit team. It was also noted that this was expected to wrap up in another few months.

In the meantime, Guyana is yet to commence an audit for the pursuing years. There has also been no word from the government on when these critical reviews would commence. Instead, VP Jagdeo has made it clear that Guyana has given itself an extension of the prescribed time limits to conduct audits, as outlined in the Production Sharing Agreement (PSA) the country inked with the oil companies. The contract stipulates that the country has two years in which it can conduct a review of Exxon’s expenses.

Be that as it may, the country’s chief spokesperson on petroleum matters noted “that it is true that the PSA says that the audit has to be completed within two years… (but) we made it clear when we got in to office, no matter how long the audits take, ExxonMobil and the co-venturers, the companies could never use as an excuse, the timeline in there.”

He continued, “…because if they use that and don’t want to comply with the audit, they would have a ton of bricks falling on their head on other issues on the regulatory side.”

 

 

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• Audit, invest, oil, return, Stabroek

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