Guyana could have received US$1.1B in 2023 with 10% royalty, instead received US$228M with 2%

Mar 31, 2024 ExxonMobil, News, Oil & Gas

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Kaieteur News – For the year 2023, Guyana received a total of US$228M in Royalty payments, in accordance with the 2016 Production Sharing Agreement (PSA) the country signed with American oil giant, ExxonMobil.

The terms of the agreement stipulates that “The Contractor shall pay, … a royalty of two percent of all Petroleum produced and sold.” Royalty is a fixed percentage paid to the owners of natural resources from the sale of production.

The paltry 2% paid to Guyana from ExxonMobil is one of the several provisions included in the deal that deprives the nation of a fair share of its wealth. In fact, the government has accepted that the country is not benefitting equally in the lopsided contract and has drafted a new PSA which will however not apply to the Stabroek Block, where over 11 billion barrels of oil has been discovered to date.

In the new agreement, government requires oil companies to pay a minimum of 10% royalty to the state.

The political Opposition had voiced its support for the new terms to be a start of discussions with ExxonMobil to secure a better deal for the country. Notably, had Guyana institute this single provision from the new PSA, the country could have received a whopping US$1,142,166,805 in royalties last year, instead of the meager US$228,433,361 it collected from the 2% arrangement.

In the first quarter of 2023, Guyana received a US$57,591,504M, followed by a US$54,436,683M payment in the second quarter. Meanwhile, in the third and fourth quarters, the country was paid US$52,805,908M and US$63,599,266M respectively.

Even though Guyana stands to gain significantly more by applying a 10% royalty to the Contractor, the government of Guyana is reluctant to engage ExxonMobil for a renegotiation of the deal.

It argues that the ‘sanctity of contracts’ principle must be respected. It also believes that seeking a renegotiation now can drive investors away and slow the pace of production and exploration activities ongoing in the Stabroek Block by the Exxon-led consortium.

Presently, over 600,000 barrels of oil per day (bpd) is being produced by three Floating Production Storage and Offloading vessels (FPSOs). Guyana is aiming to produce 1.2 million bpd by 2027.

As production increases, so will the potential losses for the country by not demanding more from its natural resources.

For its part, ExxonMobil has already made it clear that it would not walk away if government demands more from its sweet light crude, discovered in the lucrative Stabroek Block.

President of ExxonMobil Guyana Limited (EMGL), Alistair Routledge made the disclosure during a press conference in May last year in response to a question from Kaieteur News.

Companies have not run off because of renegotiation – TT Minister

It must be noted that Trinidad and Tobago’s Minister of Energy and Energy Industries, Stuart Young had offered the country’s expertise to help Guyana benefit from a better oil deal.

Young was a key speaker on the second day of the Guyana’s Energy Conference and Supply Chain Expo, hosted at the Marriott Hotel in Kingston. The TT Minister shared that the country spent seven years renegotiating almost all of its gas contracts.

He said, “It can be done, so our ability to sit down right across the aisle and to share with those who are now entering into the negotiations of their PSCs (Production Sharing Contracts), their E&P (Exploration and Production) Licenses etcetera should not be underestimated because we have done the same thing in our gas supply contracts for the upstream.”

The Minister added, “Very often I hear those who have no access to the information whatsoever talking about the energy sector and what should be done, similar to what Vice President Bharrat Jagdeo was speaking about this morning. But the point is, we in Trinidad and Tobago have spent the last seven years of our term successfully negotiating, and I can say here without fear of contradiction, every contract that we negotiated augurs better in direct revenue for the people of Trinidad and Tobago and the multinational oil and gas companies have not got up and run off.”

Young reasoned that those companies are continuing to invest since “respect and fairness” are key pillars in business.

“They continue to invest because it is all about respect and fairness of relationships and I offer that here to Guyana and to Suriname in a collaborative approach because you see I am convinced that [we can] work together to change the dynamics…” he said.

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• ExxonMobil, oil, PSA, renegotiation, royalty

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