PNC/R to decide on ring-fencing after it takes office

Jan 22, 2024 News

Kaieteur News – In the absence of the required well data from the Government of Guyana (GoG), the People’s National Congress Reform (PNC/R), led by Mr. Aubrey Norton said it will wait until it is in office to make a decision regarding ring-fencing.

Leader of the PNC/R, Aubrey Norton

The party did not host its usual media conference on Thursday; as such this newspaper reached out to Norton’s Oil and Gas spokesperson, Elson Low for clarity on whether the Opposition has officially requested the well data from government or how it plans to access the information to make a decision on ring-fencing.

A ring-fencing provision will mandate each oil project to pay for itself and would allow Guyana to enjoy 50% of the revenue generated at each project after the costs are repaid.

At its last press conference, the Opposition said it required information on the wells to determine whether ring-fencing would be feasible or deter the investors.

Over the weekend, Low told this publication that numerous requests for information were made through press statements to no avail. To this end, he assured that when the party takes office it will examine the data to make the right decision in that regard.

Economic Advisor and Spokesperson on Oil and Gas for the Opposition, Elson Low

“We have on more than one occasion requested information, in press releases, from the administration on oil operations, including quarterly reports on expenses and developments. We want to be clear, however, that in office we will seek appropriate expertise to examine all the data available, so that we can make the best decision. We need to be able to closely examine the costs of wells to determine whether ring fencing will potentially deter or otherwise affect investment into the field,” Low explained.

Given the party’s approach to examine the data after it takes office to make a decision on ring-fencing, Kaieteur News asked if the Opposition will not be taking any further action to get the information it needs.

To this end, Low said, “We will continue to press the government whenever dealing with issues that relate to information access.”

Guyana has already approved five projects in the Stabroek Block without this key provision to safeguard its earnings.

In the absence of a ring-fencing provision, ExxonMobil has been using the revenues earned from the projects in operation to fund other projects and its exploration activities across the block.

Only last week this newspaper reported that ExxonMobil in its Corporate Plan Update recently informed its shareholders that its capital expenditure is expected to be repaid in less than 10 years.

It said, “The company now anticipates total annual capital expenditures and exploration expense of $23 billion to $25 billion in 2024 and $22 billion to $27 billion annually from 2025 through 2027, generating an average return of approximately 30%.” It was keen to note, “Greater than 90% of the capex has payback periods less than 10 years.”

The oil company assured its shareholders that its capital allocation approach prioritizes competitively advantaged, high-return, low-cost-of-supply, value-accretive investments that enable ExxonMobil to lead the industry now and through the energy transition.

ExxonMobil is the operator of Guyana’s lucrative Stabroek Block. The company holds a 45% interest, while Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Petroleum Guyana Limited holds 25 percent interest.

Each project has an estimated life of 20 years. In normal circumstances, the repayment of a project would commence after oil production starts, however, ExxonMobil Guyana has been shortening Guyana’s share of profits in order to finance projects in the Stabroek Block before they start oil production.

It was reported in July 2023 that ExxonMobil deducted millions of US-dollars in decommissioning costs, to clean up the third and fourth developments in the Stabroek Block, even though these projects were yet to commence oil production.

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