Exxon head regurgitates propaganda on massive oil profits to come

Nov 24, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – As the Government of Guyana (GoG) continues to ignore calls for a renegotiation of the lopsided Production Sharing Agreement (PSA) it signed, ExxonMobil- the US oil major continues to push a misleading line that the country will benefit from jobs as revenues are due later in the future.

ExxonMobil and its partners Hess and CNOOC are the operators of the lucrative Stabroek Block. Explaining this to listeners of 94.1 FM during an interview on Thursday morning was President of ExxonMobil Guyana Limited (EMGL), Alistair Routledge.

He was at the time responding to a question on the future of Guyana and ExxonMobil when he pointed out that it was the beginning of a decades-long journey. Given that revenues are likely to come to Guyana later, the ExxonMobil President indicated that the company is delivering jobs and opportunities to Guyanese.

“Delivering business opportunities, jobs for Guyanese because it takes time to generate revenues from the oil production and for the government to be able to take that investment in roads and hospitals and improved education, that’s coming. That excites me for the future but it’s not tangible today for people. What is tangible is can I have a job? Can I grow my company and that was part of what I heard in Region Three,” Routledge said.

He was keen to note that to date 1500 Guyanese companies have participated in the development of the country’s oil and gas resources. Routledge also pointed out that in early days of production in Guyana, the operations were run mainly out of Trinidad, however, today two shore bases are now in country as well as other local companies, with close to 6,000 Guyanese workers now employed.

To this end, the EMGL President said, “Any international bench-marking would say that it’s tremendous progress.” In the meantime, he noted that the company remains focused on careful exploration activities offshore Guyana and to move safely to production.

ExxonMobil previously defended the lack of a ring-fencing provision in Guyana’s oil deal. Such a clause in the Licenses for projects to be approved, could allow for increased revenue to flow to Guyana early on. In 2019, the then Country Manager for ExxonMobil, Rod Henson told the local media corps that the absence of ring-fencing provisions in the PSA signed with Guyana is actually in the country’s best interest.

A ring-fencing provision would simply allow each oil project to pay for itself. In the absence of such a provision, the oil companies are allowed to use the revenue generated at one project to pay for others that are yet to commence production activities.

Chief policy maker for the Petroleum sector, Vice President Bharrat Jagdeo during an engagement with the media in October admitted that ring-fencing the oil projects will allow Guyana to benefit more from the wealth generated in the resource-rich Stabroek Block, immediately. Despite his acceptance however, the VP is unwilling to engage the operator to effect any changes to the lopsided 2016 PSA with Exxon or insert this clause into future Permits.

The contract stipulates that a whopping 75 percent of the monthly revenues are to be deducted as costs to repay the companies’ shareholders, while the remaining proceeds are split as profits equally with Guyana. In the absence of a ring-fencing provision, the companies have authority to use the income from producing oil projects to pay for other projects that are yet to commence producing oil.

A ring-fencing provision would therefore prevent oil companies from using revenue generated from a production field to offset costs in another project. It would also mean that when that project cost is repaid, Guyana would enjoy 50 percent of the revenue generated there. Guyana has been repeatedly advised by independent international experts to ring-fence its oil projects to ensure the country benefits from its resources early on, as this would help to improve the nation’s education, infrastructure and health services among others.

For instance, the Director of Financial Analysis for the Institute for Energy Economics and Financial Analysis (IEEFA), Tom Sanzillo in a report estimated that Guyana should receive upward of $6 billion annually by 2028 or sooner, however, the organization believes that due to all of the new costs, Guyana will be shortchanged until the 2030’s, if not longer. It would be poignant to note that last year, the Stabroek Block generated a whopping US$9.8 billion, but Guyana only received US$1.4 billion in profits and royalty, while Exxon took US$7.4 billion to recoup their investments across the Stabroek Block.

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• 94.1 FM, ExxonMobil, oil, propaganda, ring-fence

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