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Govt. now predicting lower revenues from oil sector
Kaieteur News – The government of Guyana (GoG) is now expecting lower revenues from the burgeoning oil and gas sector than anticipated earlier this year.
This is as a result of declining oil prices on the global market triggered by a slide in demand for supplies. According to the Ministry of Finance Mid-Year Report, officially released to the public on Saturday, government is still poised to receive 17 lifts of profit oil from the production activities ongoing at the Liza One and Liza two projects in the Stabroek Block.
Minister with Responsibility for Finance, Dr. Ashni Singh
It however indicated that the earnings for the commodity are expected to be less than previously anticipated. The Report explained, “With the price of crude oil declining amid demand-side concerns and financial market disruptions that threaten a global slowdown in economic activity, the forecast for NRF (Natural Resource Fund) deposits has been marginally downgraded.”
To this end, the Ministry of Finance said petroleum deposits for the year are now projected to total US$1,629.3 million, compared with US$1,631.7 million projected at the beginning of the year. This means that the country will receive US$2.4 million less than anticipated or approximately GYD$480M.
Government is now projected to earn US$1,410 million from the sale of Guyana’s share of profit oil, and another US$219.3 million in royalties. The NRF closing balance at the end of the year has been revised to approximately US$2 billion by the Ministry of Finance.
The plummeting oil price on the global market can be dangerous for newcomer to the sector, Guyana, especially as oil major, ExxonMobil continue to pump billions of US-dollars to develop the resources discovered in the Stabroek block. The country can easily find itself unable to repay the investments or enjoy profits from the industry should this trend extend.
Despite the shift to renewables and the consequent oil price volatility, the government has been ramping up not only exploration activities but production as well to avoid stranded resources.
First-half performance
During the period January to June 2023, Guyana received eight lifts of profit oil from the two Floating Production Storage and Offloading vessels (FPSOs) in operation. Three lifts were received from the Liza Destiny and five from the Liza Unity as projected.
As stated earlier, Guyana is expected to receive 17 lifts of profit oil, from the expected 136 lifts in the Stabroek Block this year.
In the meantime, the government’s Mid-Year Report indicated that during the first half of the year “Government earned US$705.2 million as revenue from its share of profit oil from two lifts that occurred in the final quarter of 2022, and seven of the eight lifts that occurred in the first six months of the year.”
It added, “Government also earned US$110.8 million in royalties related to 2022 Q4 (fourth quarter) and 2023 Q1 (first quarter) production and sales.”
In July, the country received US$73.8 million as a profit oil payment for the Government lift executed in June. The cumulative balance of the NRF, inclusive of interest income of US$35.6 million, at the end of June, 2023 was US$1,723.5 million, after two withdrawals of US$200 million each in February and May this year.
Notably, the GoG reported that the oil and gas subsector grew by an estimated 98.4 percent in the first half of the year.
The Mid-Year Report explained that the oil and gas sub-sector almost doubled its performance in the first six months of 2023 when compared with the same period last year. It was explained that the sector grew by an estimated 98.4 percent during the first half of the year. The Ministry of Finance reported, “At the end of June, total crude oil production stood at 68.7 million barrels, compared with 34.6 million barrels in the same period of last year.
It went on to note that Guyana’s second FPSO, the Liza Unity which commenced production on February 11, 2022 ramped up to a daily production of about 227,000 barrels per day. With the third FPSO, Payara, expected to come on stream in the last quarter of this year, the sector is now expected to grow by 39.6 percent this year.
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