Latest update November 15th, 2024 1:00 AM
Guyana poised to receive less than US$9B of US$70B from Liza 1 and Liza 2
Vice President, Dr. Bharrat Jagdeo (left) and Kaieteur News Publisher, Glenn Lall
…Glenn Lall says hemorrhaging of Guyana’s wealth must end
Kaieteur News – Over the estimated 20-year project life of the Liza One and Liza Two projects, approximately US$70B in revenue is expected to be generated, however, the sovereign owner of the resources will only benefit from less than US$9B.
The two projects, which are currently in operation, have a combined reserve of about one billion barrels of oil. At an average oil price of US$70 per barrel, the Liza Field is poised to generate about US$70B.
The operator of the Stabroek Block, ExxonMobil Guyana Limited has however indicated that production costs about US$40 per barrel, meaning US$40B over the life of the projects will go towards production. This leaves $30B.
Another US$9B then has to be removed for the cost of the two projects, which include expenses for the Floating Production, Storage and Offloading vessels (FPSOs) and other supporting infrastructure to produce the resources. This leaves US$21B which is further reduced by US$1.6B for pre-contract exploration and US$3.8B to decommission the projects.
This leaves the balance at US$15.6B to be shared between Exxon and Guyana. Consequently, Guyana is slated to receive US$7.8B and Exxon US$7.8B. The country is also expected to collect 2% royalty; taking its earnings to approximately US$9.4B should other expenses not be considered.
It should be noted that 40% of the reserves have already been depleted at the projects, well ahead of the 20-year lifespan outlined in respective project documents.
According to the Bank of Guyana (BoG), the country gained US$3.8B in profits and about US$500M in royalties as at June, 2024 from two projects, since startup.
Meanwhile, Publisher of Kaieteur News, Glenn Lall in an invited comment said the simple calculation demonstrates that without a renegotiation of the 2016 Production Sharing Agreement (PSA) Guyana will continue to receive “donations” from Exxon in exchange for its massive resources discovered offshore.
Turning his attention to the US$9B the country is likely to receive from the two projects out of US$70B, Lall questioned whether this was a fair 50/50 deal. The businessman pointed out that this lopsided arrangement will continue for the other four projects that have been sanctioned by the government.
To date, Exxon has received regulatory approvals for six deep water developments. A seventh application is currently pending.
To this end, Lall said, “Are you really going to sit back quietly and watch your future, your children’s future, and the fate of generations to come, be shattered like this? The devastation this oil deal will bring to our country isn’t just about unfair profits, it’s about the long-term destruction and misery Guyana will be left with.”
The newspaper Publisher argued that the oil deal will not only cripple Guyana but chain the country to foreign banks, begging for loans to keep its head above water.
According to him, “This is a ticking time bomb people. If we don’t demand renegotiation now, we’re locking ourselves into a future, where Guyana’s wealth is siphoned off, leaving nothing but debt and poverty to 99% of Guyanese.”
He reasoned, “Is that what we want for our children and generations to come? Look what the foreigners with corrupt leaders did to Africa and Asia, most of them trying to get out today, while our leaders taking us there. It’s past time for action, we can’t afford to sit silently anymore.”
Guyana’s oil deal with Exxon has been criticized by politicians but while the ruling People’s Progressive Party (PPP) government committed to renegotiation/ better contract administration, the political party has now made it clear that the terms of the arrangement will remain in place. This has been communicated on numerous occasions by Vice President, Bharrat Jagdeo who is responsible for managing the petroleum sector.
That contract not only ties Guyana to a measly 2% royalty, but allows Exxon to take 75% of revenues generated each month to cover costs. The remaining 25% is then shared with Guyana as profits.
In the absence of a ring-fencing provision, the company shortens the country’s share of profits each month- since the cost of the three projects in operation have already been repaid.
Similar Articles
THE BLUNT OF THE DAY
Sports
Features/Columnists
The Jagdeo Jig!
…Peeping Tom Kaieteur News-Vice President Bharrat Jagdeo has become master of sidestepping, shuffling, and even pirouetting... more
Rising Gun Crimes in the Caribbean: Urgent Action required by all
By Sir Ronald Sanders Kaieteur News – There is an alarming surge in gun-related violence, particularly among younger... more
Weekend Cartoon
