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Guyana to receive meagre US$9M more on 2M barrels of extra oil pumped, as oil prices dip
(Kaieteur News) – With the early startup of the fourth Floating Production Storage and Offloading (FPSO) vessel, Guyana is slated to receive two million barrels of oil more than initially anticipated for the year.
Despite the major spike in production this year, the expected revenue flow has only increased by a meager US$9.4M as a result of falling oil prices.
President Irfaan Ali
This is according to the Mid-Year Report published by the Ministry of Finance. The document explained, “At the beginning of the year, it was anticipated that Government would have 31 lifts of profit oil from the Stabroek Block. Government is now projected to have 33 lifts this year, following the earlier-than-anticipated start-up of the One Guyana FPSO in August.”
Each lift is equivalent to one million barrels of oil. With the additional lifts, petroleum deposits into the Natural Resource Fund (NRF) for the year are now projected to total US$2,512.4 million, or a meager US$9.4 million more than the US$2,503 million projected earlier this year, as a result of lower crude oil prices.
The report states, “Government is now expected to earn US$2,171.2 million from the sale of Guyana’s share of profit oil, and US$341.2 million in royalties. Further, in accordance with the NRF Act 2021, US$2,463.9 million is expected to be withdrawn from the Fund this year. Consequently, the NRF closing balance is estimated to stand at US$3,248.8 million at the end of 2025.”
Government was previously warned that lower oil prices may significantly reduce the country’s ability to enjoy the vast natural resources discovered offshore, as it refuses to ring-fence the projects in the Stabroek Block.
Ring-fencing would require each oil project to pay for itself. After the operator recovers all its expense relating to the development, Guyana would benefit from higher profits.
According to the Stabroek Block oil deal, Exxon can recover up to 75% of oil produced monthly for its expenses. The remaining 25% is split between the GoG and Exxon as profits.
In the absence of a ring-fencing provision, ExxonMobil uses the oil produced from projects in operation to finance its planned developments and continue exploring the block. To date, the country could have been receiving full 50% profits on the four projects currently producing oil, as the contractor has already recovered over US$34B in expenses.
Experts had warned that this could significantly affect the revenue Guyana receives in the future as oil prices continue to fall amid a decline in demand for the commodity.
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