No investment mandate set for Guyana’s oil fund

Jul 21, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – The Board of Directors for Guyana’s Natural Resource Fund at a June, 2023 meeting mandated that the oil revenues not be invested into any assets but rather, be maintained in the deposit account held at the Federal Reserve Bank of New York.

In so doing, it will earn overnight deposit interest at the prevailing federal funds rate of 5.05%. This was outlined in the 2023 second quarter report produced and published by Bank of Guyana.  It was also agreed at the June meeting that Bank of Guyana will continue to monitor the overnight interest rate and inform the Chairman, Major General (ret’d), Joseph Givinda Singh of any changes by the Federal Reserve Bank to consider redeploying cash.

During the second quarter, Central Bank said the Fund accounted for inflows amounting to $91.5B (US$438.95 million) comprising of profit oil – $80.4B (US$385.69 million) and royalties – G$11.1B (US$53.26 million).

Central Bank said higher levels of profit oil and lower amount of royalties were recorded for this quarter in comparison to $33.7B (US$161.86 million) and $12B (US$57.59 million) respectively for the previous quarter. These funds were deposited into the Natural Resource Fund account held at the Federal Reserve Bank of New York.

Since its inception, the Fund has accounted for $489.3B (US$2.3B) from 29 lifts of profit oil and $69B (US$330.92 million) from royalties. Over the quarter, the Federal Reserve also increased its interest rates target range once moving it from 4.75% – 5% to 5% – 5.25%. As a result of these increases, interest rates on overnight deposits were higher. The higher rates as well as a higher account balance, resulted in the Fund earning a higher level of interest income on its overnight deposits than previous quarters. The Fund earned $4.1B (US$19.94 million) in interest income over the quarter compared to $3.3B (US$15.66 million) the previous quarter.

The value of the Fund also amounted to $359.3B (US$1.7B) at the end of June 2023, and reflected an increase of 17.68% from the previous quarter’s level.

Central Bank also reported that the Fund recorded a profit of $4.1B (US$19.94 million) this quarter in comparison with $3.3B (US$15.66 million) for the preceding quarter solely due to interest earned on deposits. This resulted in a return1 of 1.159% for the quarter compared with 1.059% in the previous quarter. The Fund also earned an annualized return of 1.097% since its inception.

With respect to withdrawals, the bank said transfers to the Government of Guyana’s Consolidated Fund account amounted to $41.7B (US$200 million). For the year to date, a total of $83.4B (US$400 million) has been transferred from the Fund, accounting for 39.92% of the estimated amount budgeted to be withdrawn in 2023 which totals $208.9B (US$1,002 million).

Guyana’s oil revenues are derived from operations in the Stabroek Block.  In that offshore concession is the Liza Phase 1 Development Project which began production in late 2019 and reached its peak capacity of 150,000 barrels per day (bpd) in December 2020. Production from the Stabroek Block’s Liza Phase 2 began in February 2022 and the project reached its full production capacity of 220,000 barrels per day (bpd) by the end of December 2022.

On September 30, 2020, the Government of Guyana announced approval of the Payara Offshore Development Project. With an estimated resource base of approximately 600 million oil-equivalent barrels, production of up to 220,000 bpd is expected to begin in 2023.

Plans are also in order for ExxonMobil’s 4th project – the Yellowtail Development project – which is expected to start production of 250,000 bpd in 2025 taking Guyana to a production level of 810,000 bpd. It is projected that by 2027, six to seven projects will be in operation and that by the end of the decade, Guyana’s oil production will increase to more than 1 million bpd.

The Stabroek Block is estimated to contain resources of approximately 11 billion oilequivalent barrels and is operated by ExxonMobil affiliate, Esso Exploration and Production Guyana Limited. They hold a 45% interest in the block, Hess Guyana Exploration Ltd. holds 30% interest while CNOOC Petroleum Guyana Limited holds the remaining 25%. During April 2023, the Government of Guyana approved the Uaru project – Guyana’s 5th development project offshore Guyana. Additionally, approval for development of a sixth project – Whiptail is expected to be addressed later this year.

The Government of Guyana had launched its first competitive bidding round for 14 of its existing offshore oil blocks during December 2022 – 11 being located in shallow water and three in ultra-deepwater. The first bidding round was expected to conclude in April 2023 with new contracts to be awarded during the second quarter of the year. However, this was delayed as the government postponed its offshore licensing round to mid-July so as to facilitate a review of the country’s oil and gas regulatory framework.

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• Board of Directors, Guyana, mandate, Natural Resource Fund, New York

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