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Guyana to finally receive rightful 2% royalty from Exxon
…as Licence for 7th project plugs loophole
(Kaieteur News) – Guyana will finally receive its rightful share of royalty from the oil and gas operations in the Stabroek Block as a result of the new and carefully worded Petroleum Licence (PL) granted by the Government of Guyana (GoG) for the seventh project, Hammerhead.
ExxonMobil’s 2024 financial statement shows that the company paid royalty to Guyana from its share of revenue.
Royalty is a payment made by the extractors of natural resources to the rightful owners of the wealth.
Usually, ExxonMobil pays Guyana 2% of their profits as royalty to the government of Guyana, as reflected on the company’s annual financials. This arrangement has been condemned as further shortening the country’s rightful entitlement, since the oil contract states that the sum should be paid from “all petroleum produced and sold”.
Article 15.6 of the PSA states, “The Contractor shall pay, at the Government’s election either in cash based on the value of the relevant Petroleum as calculated pursuant to Article 13 or in kind, a royalty of two percent (2%) of all Petroleum produced and sold, less the quantities of Petroleum used for fuel or transportation in Petroleum Operations, from all production licenses subject to this Agreement.”
By first deducting 75% of the oil as cost, then sharing 12.5% with Guyana as profit, the country has been losing massive revenue over the years by failing to ensure it receives its rightful royalty.
In the recently issued PL for the Hammerhead development, the government has made it clear to Exxon that this previous arrangement will not continue.
The Licence clearly states at (mm) 3(1), “The Licence Holder shall pay to the Government within the period specified therefore by the Minister, royalty in respect of the petroleum produced in the Production Area to which this Licence relates at the rate of two (2) per cent of the gross petroleum produced from the Production Area or where arrangements are made in the Petroleum Agreement for payment of royalty in kind wholly or in part in keeping with the Act, by making such payment and/or deliveries in accordance with aforesaid arrangements.”
Part 2 goes on to specify that gross petroleum produced from the Production Area-for the purposes of payment of royalty shall mean: “(a) all petroleum produced and sold from the Production Area including such petroleum which has been produced but not sold, but shall exclude all petroleum utilised for reinjection or other Petroleum Operations from the Production Area.”
Petroleum produced but used for fuel or transportation in petroleum operations shall be free of royalty in keeping with the provisions of the Petroleum Agreement.
Notably, this provision was featured in the previous Licence granted by the GoG for the sixth project, Whiptail. Kaieteur News did not observe the same clear requirement outlined in the fifth PL issued to the operator for the Uaru project.
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uyana needs to maintain a team of highly skilled attorneys to comb through contracts with a fine tooth comb. Whoever were involved previously should be tarred and feathered. They were certainly hoodwinked or crooked. Who knows.
2%. WHAT!
Something is wrong