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Exxon unable to say when Guyana will receive full 50% profit share
…as more projects being approved
Kaieteur News – As Guyana continues to grant more oil projects to the multinational oil giant, ExxonMobil, the country’s chance of enjoying larger profits from its resource is being further delayed.
EMGL Business Services Manager, John Colling
Under the 2016 Production Sharing Agreement (PSA), 75% of oil produced monthly is recovered by the operator as cost. The remaining 25% is then split between the oil companies and Guyana. Further, the contract stipulates that only after all costs have been recovered can the partners enjoy 50/50 of the revenue generated as profits.
During a media engagement earlier this year, Exxon’s Business Services Manager, John Colling was unable to say when Guyana’s share of profit would increase under the lopsided arrangement.
He conceded, “Currently, a significant portion of the revenue is being allocated for cost recovery. ExxonMobil Guyana and its partners have invested US$40B to date and have only recovered US$33B, so there is a cost recovery ongoing.”
“In the future once all of the costs have been recovered a larger component of the revenue will be available for profit oil, for splitting between EMGL and its partners and the government of Guyana and we expect by the end of the decade that the government of Guyana will be receiving US$10B a year in profit oil and royalty which is equivalent to GY$2 trillion,” Colling added.
When asked to specify when this would be possible, the Business Services Manager noted that there are a number of factors that drive future performance but his focus was to cover results up to 2024. He was therefore unable to give a clear indication of the year Guyana could receive the lion’s share of its wealth.
“We look at a number of prices, we look at a number of scenarios so I can’t be more specific than to say in general we look at all the different assumptions we expect by the end of the decade for that number to approximate US$10B a year,” he said.
Colling was keen to note that EMGL and its partners have committed to invest over US$55B in six projects that were approved at the time, adding that factors such as oil price and startup date of those Floating Production Storage and Offloading vessels (FPSOs) could affect the timeline for cost recovery.
According to him, Exxon believes the Stabroek Block is “highly profitable” as seen since the inception and startup of its three major projects. “We are seeing the profits and we are seeing those profits flowing to the government of Guyana, the people of Guyana as well as the partners who have invested substantially,” he said.
On Monday, the government of Guyana announced the approval of a seventh oil project, Hammerhead pegged at almost US$7B. This means that more expense has been added to the cost bank, further delaying Guyana’s chance of enjoying a higher profit share.
This is particularly troubling as experts predict oil price to decline significantly in the years ahead, as demand declines for the commodity, due to the shift to cleaner energy sources.
It is also important to note that this state of affairs is as a result of the lack of ring-fencing. A ring-fencing provision would ensure that each oil project pays for itself, increasing the revenue available for profit sharing between the partners.
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