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Guyana will pay off Exxon all costs for 7 oil projects by year-end
…but company cannot say when country will receive full 50% profit
By Davina Bagot
Kaieteur News – By the end of 2026 Guyana will repay ExxonMobil all expenses relating to the seven sanctioned projects but the company is uncertain whether the country will be able to enjoy its full 50% profits in accordance with the 2016 Production Sharing Agreement (PSA).
President of ExxonMObil Guyana, Alistair Routledge addressing reporters during the press conference
This is according to President of ExxonMobil Guyana Limited (EMGL), Alistair Routledge. During a media conference on Thursday at its Ogle Headquarters, East Coast Demerara the Country Manager disclosed that the situation in Iran has resulted in increased oil prices, which may work in favour of Guyana.
Oil prices, according to Routledge are now hovering above U.S.$100 per barrel, compared with the anticipated $60 per barrel at the beginning of the year. He highlighted that the oil contract allows up to 75% of the gross revenues to be used to recover cost.
To this end, he noted, “We were anticipating sometime next year in 2027 that we were going to get to the point where we had recovered those historic cost probably largely because of just increasing volumes of production that were generating higher and higher revenues to offset the ongoing expenditures plus recover historic costs. What we are now seeing in this price environment is that will accelerate.”
Routledge said that while the company does not forecast oil prices, if the cost per barrel is maintained then the country can pay off all costs in the cost bank this year.
“If you stay at the current oil price then it will happen this year based on the level of expenditures and the production that we anticipate so that’s a significant acceleration. What that then means is that instead roughly the 14 and a half percent that the country has been receiving by way of revenues into the Natural Resource Fund from the Stabroek production and revenues, what will happen is that percentage will significantly increase,” he explained.
When it comes to Guyana’s share of profits however, Routledge made it clear that Guyana’s contractual 50% profit share is still uncertain.
According to him, “What exactly that percentage is depends on oil price, depends on volume, depends on how much money is being spent in the months or two months leading in to any given month.”
The 2016 PSA states at Article 11 that the Contractor (ExxonMobil) shall bear and pay all costs incurred in carrying out petroleum operations and shall recover these costs on a monthly basis at a rate of 75% of total production.
Following the recovery of all costs, Article 11.4 provides “The balance of crude oil…shall be shared between the Government and the Contractor for each Field in the following proportions: Contractor fifty percent (50%) and Minister fifty percent (50%).”
So far, ExxonMobil has expended U.S.$40B to develop the seven oil projects approved to date. Currently, U.S.$5B remains in the cost bank to be recovered by the company.
Should oil prices decline, the EMGL Country Manager noted that the timeline could be pushed back to 2027. He however noted, “…given what’s happening in the world, it looks like we may be in a higher price environment for several weeks and that’s all it may take to significantly reduce that cost bank.”
In his earlier remarks, Routledge pointed to the company’s plans to pursue two additional projects in the Stabroek Block- Longtail and Haimara- the eighth and ninth, respectively.
To this end, Kaieteur News asked the company to explain how Guyana would still clear the cost bank this year. Routledge however maintained that higher oil prices coupled with increased production will keep the cost bank down.
He said, “Remember our production levels are going up so we are already somewhere around 900,000 barrels per day and then when you layer on higher oil price, the revenue stream is increasing significantly. By the time we go into next year and we start up the next project it will add another 250,000 barrels per day, so then you see again the production level is increasing so even if the oil prices come down, we are generating more revenue so all our forecast would indicate at any reasonable projection of oil price we will not go back into the mode where we are building up a cost bank.”
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