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Govt. will seek expert advice on financing of future Exxon projects
…as country pays off company for 7 projects, now enjoying triple profits
By Davina Bagot
(Kaieteur News) – President Irfaan Ali on Tuesday announced plans for the government of Guyana (GoG) to seek expert advice on the financing of new projects in the Stabroek Block, now that the country has repaid ExxonMobil for seven deepwater developments and is enjoying three times the profits it previously received.
The President made the disclosure in response to a question from this newspaper, following his revelation that Guyana is now enjoying 39.8% profits from the Stabroek Block, compared with 12.5% while the company was recovering its expenses.
President Irfaan Ali
In accordance with the terms of the 2016 Production Sharing Agreement (PSA), Exxon was allowed to take out 75% of the oil produced in Guyana each month until all of the company’s investments were repaid.
The remaining 25% of oil each month was split between Guyana and the contractors, with the country receiving half of the “profit oil” or 12.5%. The country’s profit share has now increased since the cost of all projects approved to date have been repaid; but this does not mean the cost bank is empty as operational, exploration and other expenses still exist. Consequently, the President said 20% of production has been set aside in the new formula for costs.
In the meantime, ExxonMobil is currently pursuing at least two new projects in the Stabroek Block- its eighth and ninth- which will add more expenses to the cost bank. Without implementing new systems like a ring-fencing provision, Guyana’s profit share could again fall to a meager 12.5% to allow the operator to finance these multibillion US-dollar projects.
To this end, Kaieteur News specifically asked the Head of State to explain how new projects would be governed, whether Guyana would allow its share of profits to be invested into upcoming developments and if government would then seek a greater share of revenue as an investor.
President Ali said, “Now that we are at this new phase in the development of our oil and gas sector, there are ongoing internal discussions and of course we will also seek expert advice on this matter to make a determination on how the next phase of projects will be treated having regard for the state of the global sector and of course the need for investment, the structure of that investment, where that investment is coming from and of course all the other exploration that is going to take place.”
He assured that these discussions are currently ongoing, explaining that a decision is yet to be made in that regard.
Should the GoG implement a ring-fencing provision, the cost of new projects will only be recovered by Exxon when the specific operation comes online. This means that the project will pay for itself and ensure Guyana continues to receive a larger share of the pie.
Opposition Member of Parliament (MP) Saiku Andrews recently highlighted the importance of the country receiving its rightful share of profits under the 2016 Production Sharing Agreement (PSA), arguing that no prudent businessman would allow its revenue to be continuously delayed.
To this end, MP Andrews urged, “It cannot work like that. No businessman that is prudent would allow that and I do not think that the government should allow it and the Guyanese people should not accept it.”
Instead, he suggested that if Guyana’s profit share would be reduced again to pay for more projects, then the country should in return receive a larger share of revenue since it would then become an investor.
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Well ! We thought they (GoG) would have done this in the Beginning.
Has Jagdeo (Guyana’s oil man-so they say) ran out of ideas ?