“Guyana is the future for ExxonMobil”

Jul 27, 2023 ExxonMobil, News, Oil & Gas

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…company spokeswoman says in documentary

Kaieteur News – As the Stabroek Block partners, ExxonMobil, Hess and CNOOC continue to enjoy the provisions of the lopsided Production Sharing Agreement (PSA) signed with the Government of Guyana in 2016, the companies are excited about the discoveries made and the potential resources yet to be unlocked in the resource-rich offshore acreage.

Esso Exploration and Production Guyana Limited- ExxonMobil Guyana- in a new episode of ‘Access ExxonMobil Guyana’, released on Tuesday evening admitted that Guyana has been driving the development of the company.

Communications Advisor for ExxonMobil Guyana, Keisha Gilkes in the documentary asked Global Country Communications Manager, Kimberly Brasington about the role Guyana will play not only in the future of the industry but with ExxonMobil when she disclosed, “Guyana is the future for ExxonMobil.” Brasington continued that the Guyana operations have been driving the company’s growth while at the same time developing country, as she lauded the partnership.

But even with Exxon’s operations already being driven by the resources discovered in Guyana, the company still believes it’s early days and there is still much more growth to come. Brasington explained, “In 2016 we felt it was early days, and it was, and you look at how much growth we’ve had, but you’re right, to be honest it’s still early days because this industry is such a long-term perspective. There is still so much growth to come.”

Presently, ExxonMobil is producing oil offshore at the Liza One and Liza Two projects in the Stabroek Block. A third Floating Production Storage and Offloading (FPSO) vessel has already arrived in the country and is expected to startup before the end of this year.

The company is producing an average of 400,000 barrels per day, well above the prescribed safety limits for each vessel. Exxon said the additional production activities were approved by the Environmental Protection Agency (EPA).

The third project will add an extra 220,000 barrels per day once successfully commissioned. ExxonMobil also has two other sanctioned projects, Yellowtail and Uaru that will startup in 2025 and late 2026, respectively, according to the company’s Environmental Impact Assessments (EIAs). Meanwhile, a sixth project is pending approval at the EPA. Since its first discovery in 2015, ExxonMobil has since expanded the number of finds in the Stabroek Block, taking the total discoveries to date to 36.

Oil contract

Despite the continued success of the Block, the People’s Progressive Party government, though promising to review and renegotiate contracts, is unwilling to engage the company for more resources out of the deal. Government said it will instead develop a new PSA for improved fiscal terms; this PSA will govern the remaining oil blocks and will not extend to the country’s largest reservoir, the Stabroek Block.

The PSA, signed by former Minister of Natural Resources, Raphael Trotman is now known globally as the worst oil contract. Trotman recently cited his support for a renegotiation of the contract in his new book titled ‘From Destiny to Prosperity’ and has pledged support to government in this regard. Vice President Bharrat Jagdeo is however still adamant that the deal must abide by the ‘sanctity of contract’ provision, even though he is on record threatening to “rain bricks” on Exxon’s head if it refuses to allow a deviation of the auditing provisions.

In the meantime, Guyanese continue to protest against the contract, pressing leaders to secure a better deal. Earlier this year, a group of protestors called for oil production to cease until the operator agreed to changes in the contract.

A comparison of Guyana’s contract to 130 others in the World, done by Kaieteur News found that the Stabroek Block deal features some of the worst provisions.  For example, the PSA sees the government paying the contractor’s income tax out of the country’s share of the profits. However, none of the 130 PSAs examined shows this arrangement.

Additionally, the Guyana-ExxonMobil PSA is the only one out of 130 contracts, which has no ring-fencing provisions to prevent costs of unsuccessful wells being carried over to that of successful wells. There is also no sliding scale for royalty to increase as production improves. And that is not all. Guyana’s PSA is the only one out of 130 in the world that allows insurance premiums to be fully recovered as well as interest on loans and financing costs that are incurred by the contractors.

Guyana has also agreed for the company to deduct 75 percent of the monthly revenue earned towards cost recovery; the remaining 25 percent is then shared equally as profits. In addition to its 12.5 percent profits, Guyana also receives a meagre two percent royalty on its sweet light crude. As a result of the country’s miniscule take from its resources, revenue from the oil sector has been slowly trickling in, with majority of the earnings being deducted by ExxonMobil for cost recovery.

For instance, this newspaper reported that in 2022, the Stabroek Block in 2022 generated some US$9.8 billion in gross revenue, but Guyana only earned a mere US$1.4 billion in profits. This also included the royalty paid by the operator. Meanwhile, ExxonMobil deducted a whopping US$7.4 billion towards the recovery of its investment for the petroleum related activities.

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• Development, driving, ExxonMobil, future, Guyana

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