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`Approving more oil projects without knowing projected income can reduce Guyana’s profits – Opposition
Kaieteur News – The Opposition is calling on government to release the projected cash flow from the five projects sanctioned to date in the Stabroek Block, saying that this information is vital to arm citizens with the knowledge of the extent and rate at which ExxonMobil is expected to recoup its investments.
Leader of the Opposition, Aubrey Norton
“This has serious implications for the country getting more revenues not just from higher production, but through an increase in profit oil,” the Office of the Leader of the Opposition said in a statement on Saturday. In keeping with the provisions of the 2016 Production Sharing Agreement (PSA), up to 75% of monthly revenues can be deducted by the operator to cover expenses. The remaining 25% is split with Guyana as profits.
At a press conference last month, the President of ExxonMobil Guyana Limited (EMGL), Alistair Routledge indicated that his company spent US$29B on the Stabroek Block thus far. Out of that sum, he noted that US$19B has been recovered.
To this end, the Opposition explained that Vice President, Bharrat Jagdeo and Exxon have signaled that Guyana’s share of oil revenues is projected to increase substantially in the next few years as the company recoups more and more of its investments. “To put this in technical terms: the profit oil to cost oil ratio of 25 – 75% will shift towards greater profit oil,” the Opposition pointed out.
It said that while it welcomes this announcement, the government must ensure this projection materialises to the fullest extent possible. “It must therefore not rush to approve new oil projects in the Stabroek Block, which would drive up cost-oil and thereby deny Guyana the chance to acquire a greater share of revenues,” the political group urged.
The Opposition reasoned that both Exxon and government must have utilized the projected cash flow for the five projects sanctioned to date in determining the growth in profits for the country. To this end, it called for the information to be released immediately. According to the Opposition, “While demands for a better contract focus on the royalty and ring-fencing aspects, we restate our view that the country must also target greater profit oil to extract a larger proportion of revenues. Such an approach, however, requires a more judicious oil extraction policy, one which is absent today, but one which we, as the next government, have pledged to finalize with the company. We, in the Opposition, are convinced that Guyana must and can get a better oil deal in the Stabroek Block.”
The Opposition’s call for the release of revenue forecast from the oil and gas sector finds its merit in the Extractive Industries and Transparency Initiative (EITI) Standards. Guyana, as an implementing country is required to abide by the guiding principles of the watchdog institution.
Notably, the 2023 EITI Standards state at 5.3 (b): “Implementing countries are expected to disclose any forecasts related to future revenues from the extractive sector, including the underlying assumptions related to projected production levels, projected project costs and projected commodity prices, where they exist. The government is encouraged to explain how energy transition and climate risk considerations have been considered in revenue forecasting.” Additionally, 5.3 (c) goes on to point out that oil and gas companies are also encouraged to disclose projected project production levels, and estimated timelines related to cost recovery, upon request by the multi-stakeholder group.
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