Latest update January 6th, 2025 4:00 AM
Failure to increase royalty at Stabroek Block, Guyana lost out on US$872M this year
Kaieteur News – Guyana has lost out on US$872M (GY$181.1B) this year, due to the government’s refusal to apply the new 10 percent royalty rate to the Stabroek Block.
Kaieteur News has shown time and again that applying the new royalty rate which is set for new contracts would significantly increase Guyana’s annual earnings. For instance, if the royalty for ExxonMobil’s oil projects was 10% instead of the current 2%, Guyana’s last quarterly royalty payment could have been US$264M. Instead, it was US$52.8M.
Guyana has received all four quarterly royalty payments scheduled for 2023; Exxon and its co-venturers paid US$218M (GY$45.5B) to Guyana’s Natural Resource Fund (NRF), equating to 2% of the value of annual crude production. Had the royalty rate been 10%, this figure would have been US$1.09B, signifying a lost opportunity for Guyana to earn an additional US$872M due to the PPP/C administration’s reluctance to seek better royalty terms.
Such a significant increase in revenue could immensely benefit Guyana’s economy, especially considering the vast quantities of oil expected from the Stabroek Block in the future. The government could have leveraged these funds for environmental protection through adaptation and mitigation initiatives. Vice President Dr. Bharrat Jagdeo has frequently lamented the lack of funds for such purposes due to unfulfilled commitments by developed countries.
The Prosperity Floating, Production, Storage, and Offloading (FPSO) vessel arrived in Guyana April this year
The additional US$872M per annum could also cover the repayment of the US$138M loan from China’s EXIM Bank for the Cheddi Jagan International Airport (CJIA) renovation, with a surplus of nearly US$734M. The PPP/C government incurred this debt, further burdening Guyana financially.
Annually, US$872M could contribute significantly to the country’s development. This sum is sufficient to finance the entire Gas-to-Energy project at Wales, which the government is building. Such financial independence would even alleviate the need for Guyana take a begging bowl to the US EXIM Bank for US$646M to finance the project.
The royalties paid into the nation’s NRF were based on oil production levels of under 400,000 barrels per day (bpd) from two projects. With the Prosperity floating production, storage and offloading (FPSO) vessel now in operation, production is set to rise to 620,000 barrels of oil per day (bpd). Exxon’s plans indicate an increase to 1.2 million bpd by 2027. With every increase, there is a proportionate increase in losses. Persisting with a 2% royalty rate for exploiting 11 billion barrels of oil equivalent in the Stabroek Block will result in Guyana forfeiting billions in potential earnings over the PSA’s lifespan. The government will be negotiating with ExxonMobil to apply the new model terms to Block S8 – a block in which there is no guarantee oil will be found.
Similar Articles
THE BLUNT OF THE DAY
Sports
Features/Columnists
Jagdeo is a liability to Irfaan Ali
Peeping Tom… Kaieteur News- Bharrat Jagdeo has long represented an unsettling paradox in Guyana’s politics. He... more
Forget Begging Rich Nations: Caribbean Countries Should Act to Save Themselves
By Sir Ronald Sanders Kaieteur News- It has long been evident that the world’s richest nations, especially those responsible... more
Weekend Cartoon
