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Guyanese gain US$1.5B in contracts from ExxonMobil in 9 years
Minister of Natural Resources, Vickram Bharrat and President of ExxonMobil Guyana Limited, Alistair Routledge in smiles as the company receives its 2023 Local Content Certificate of Compliance
Kaieteur News – The Government of Guyana (GoG) has refused to renegotiate the lopsided terms of the 2016 Production Sharing Agreement (PSA) with ExxonMobil and has instead opted to pursue the “low-hanging fruits” such as opportunities in the Local Content sector.
Since 2015, however when the operator of the Stabroek Block struck oil, the company has only spent US$1.5 billion in contracts procured from local companies.
This was revealed by ExxonMobil Guyana Limited (EMGL) on Tuesday in a social media post. The company said it recently received its 2023 Local Content Certificate of Compliance from the Minister of Natural Resources, Vickram Bharrat as well as its approval for the 2024 annual plan.
“We are proud of the work we’re doing in Guyana to help develop a globally competitive workforce and supply chain,” Exxon said, adding that “ExxonMobil Guyana and its contractors have spent US $1.5 billion with Guyanese suppliers since oil was first discovered in 2015”.
The company was keen to point out that more than 1,700 unique local suppliers and 6,200 Guyanese support its activities in Guyana.
Notably, Guyana has only received a total of US$4.2 billion in revenue from the production of oil that commenced in December 2019. In the meantime, ExxonMobil and its partners, Hess and CNOOC have walked away with a whopping US$21.6B in profits and through the cost recovery mechanism outlined in the PSA.
Guyana has failed to secure more revenue from the production of its sweet light crude as a result of the contract that was signed by the previous government in 2016. The deal allows Exxon to deduct 75% of the monthly earnings to recover its investments into the block. The remaining 25% in then shared with Guyana as profits, with the country paid an additional 2% as royalty.
Guyana has also waived taxes for the company and its subcontractors, losing billions annually as a result of this major gap. The country further loses revenue by failing to ring-fence the projects in the Stabroek Block. A ring-fencing provision would prevent oil companies from using revenue generated from a production field to offset costs in another project. In the absence of such a provision, ExxonMobil have been using the proceeds from the Liza One, Liza Two and Payara projects, currently producing more than 645,000 barrels of oil per day, to pay for costs related to other Stabroek Block projects. This has resulted in Guyana failing to pay off the Liza Two project costs, pegged at US$6 billion, even though ExxonMobil recovered a whopping US$7.4 billion in expenses in 2022 alone.
Instead of engaging the oil company for a fair oil deal, the GoG has instead said it will pursue revenues and benefits for the people of Guyana through the Local Content Act, passed in the National Assembly in December 2021.
The legislation prioritises the use of Guyanese nationals and Guyanese companies in the procurement of goods and services for the enhancement of the value chain of the sector. The First Schedule of the Act ring-fences 40 categories of work for Guyanese participation via the supply of goods and the provision of services which include: food supply, rental of office space, accommodation, insurance, accounting and legal services.
The foregoing categories carry minimum local content levels for which local participation had to be achieved by Contractors, Sub-Contractors, and Licensees in the sector by the end of the calendar year 2022.
Ensuring these targets are met is the Local Content Secretariat.
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