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Foreign investment in oil sector larger than costs recovered by Exxon- Gov’t Report
Kaieteur News – The success of Guyana’s Stabroek Block has been attracting large investments in the oil sector with Foreign Direct Investments (FDI) more than doubling its performance in the first six months of this year, compared with the same period last year.
The Ministry of Finance in the recently released Mid-Year Report explained that net FDI reversed its deficit of US$769.4 million from the year prior to register a surplus of US$10.7 million this year. It was keen to note that this was on account of higher foreign direct investments, primarily linked to the oil and gas sector.
ExxonMobil Guyana Limited (EMGL), the operator of the Stabroek Block has been given the green light to pursue five deep water projects in the Stabroek Block. The projects collectively carry a price tag of about US$40 billion. Simultaneously, the developer is carrying out exploration works in its resource-rich acreage, further driving up investments.
In underlining the massive investments being made in the oil and gas sector, the government said, “These inflows, which more than doubled over the review period, outpaced growth in cost recovery payments made to operators within the Stabroek Block.”
The report made no mention of the cost recovered by ExxonMobil towards its investments during the first six months of 2023.
The Central Bank, however, in its first quarter report of 2023 revealed that a whopping US$1 billion was recovered by Exxon during the first three months of 2023 alone. It would be prudent to note that during this period Guyana earned a meager US$219 million, inclusive of profits and royalties paid to the country.
The second quarter report has not yet been released by the Bank of Guyana (BoG).
In 2022, the Stabroek Block generated US$9.8 billion; however, Exxon deducted US$7.4 billion in cost recovery, leaving Guyana with a mere US$1.4 billion inclusive of profits and royalty.
Presently, ExxonMobil is producing an average 400,000 barrels per day at two of its five sanctioned developments, the Liza One and Liza Two. A third project, Payara is expected to come on stream later this year.
In the meantime, Exxon is utilizing the revenue generated from the two fields to recover its investments across the Block. In the absence of a ring-fencing provision, the company is allowed to use the revenue from the two projects to pay for expenditure related to other developments.
Through the Production Sharing Agreement (PSA) inked with the GoG in 2016, the company is allowed to deduct 75 percent of the monthly revenue towards the repayment of costs for the offshore deepwater projects. This process is referred to as ‘cost recovery.’ The remaining 25 percent revenue is split as profits between the government and the Stabroek Block partners.
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