July $11.3 billion royalties could have been $57 billion had new oil terms applied

Aug 13, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – Guyana’s July financial report for the Natural Resource Fund has brought the nation’s oil royalties into sharp focus. The Stabroek Block companies, led by ExxonMobil, paid the Guyanese government a royalty of approximately $11,350,048,000 for the past quarter. This sum, although sizable, could have been a staggering $56,750,240,000 had Guyana applied the new model royalty rate of 10%.

The royalty received is based on a 2% rate from the oil produced and sold from the Stabroek Block. This payment covers three months.

However, Guyana’s recent introduction of a model agreement for new oil blocks proposes a substantially higher royalty rate of 10%. The intention behind this new model is to maximize the economic benefit Guyana reaps from its rich natural resources. Outrageously, the decision was made not to apply this increased rate to the existing projects of the Stabroek Block companies.

The disparity between the potential and actual royalties received from the Stabroek Block is concerning. Guyana could be making more money from the only producing block.

The Natural Resource Fund began July with an opening balance of approximately $359,340,928,000. With the inflows from the Stabroek Block’s profit oil, which amounted to $15,381,743,000, along with the royalty, the month concluded with a closing balance of $387,677,472,000 (approx. US$1.86 billion). This balance primarily lies as cash and cash equivalents in the New York Federal Reserve Bank.

For the year, Guyana has received three royalty payments and eight profit oil lifts. The country expects to receive one more quarterly royalty payment and nine more profit oil lifts. While the country has seen a significant boost in its revenues from the oil sector, including investment income of $1,604,753,000, questions remain. How would the country’s financial position look today if the revised 10% royalty rate applied to the Stabroek Block?

On the other hand, the Stabroek Block partners will receive more handsome financial endowments this year. ExxonMobil, Hess and CNOOC are expected to see combined profits soaring beyond $1 trillion in 2023, 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 per day (bpd). Exxon and partners already have five sanctioned projects in Guyana and are eyeing a sixth development in the oil-rich Stabroek Block.

Though the Stabroek Block remains at a 2% royalty rate, the introduction of the 10% rate for other blocks is a promising sign for the sharing of spoils from potential development of other blocks.

financial, natural, oil, royalties, terms

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July $11.3 billion royalties could have been $57 billion had new oil terms applied

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