10% royalty on oil production should be Guyana’s top priority - Hinds

10% royalty on oil production should be Guyana’s top priority – Hinds

Feb 25, 2018 ExxonMobil, News

Chartered Accountant, Nigel Hinds

In order to capitalize on oil discovery here, the Government of Guyana must renegotiate the current petroleum agreement with ExxonMobil and its affiliates to reflect an increase from a two percent royalty to 10 per cent.
This view was shared by Chartered Accountant, Nigel Hinds, who provided Kaieteur News with a detailed breakdown of opportunity losses from Guyana’s acceptance of a two percent royalty.
Hinds cited the recent comments from Dr. Jan Mangal, Advisor on Petroleum to President David Granger, who outlined that globally, royalty is more between 10 percent and 20 percent. Dr. Mangal had noted that in some countries, the royalty is much higher than 20 percent.
It was on this premise that Hinds suggested that the Government replaces the two percent royalty with 10 per cent in the Petroleum Agreement.
“This should be our first, second and third priority,” Hinds stated.
The Chartered Accountant reasoned that the current two percent places Guyana in the unrealistic S***H*** category, using U.S. President Donald Trump’s terminology. He stated that Guyana has received “frontier” status as per oil Industry analyst – Wood McKenzie.
According to Hinds, it is highly reasonable that as a “frontier” status country, Guyana accepts 10 percent, the lowest end of the royalty range, as referenced by Dr. Mangal.
Hinds stated that at least the 10 percent will give Guyana the funding to invest in health, education, security, employment, old age pension, infrastructure, support of old and new industries; befitting a country that has over four billion barrels of the lowest cost recoverable crude oil and highest quality crude oil in all the Americas, Africa and probably worldwide.
It is Hinds’s view that it is not the best strategy now to wrangle with ExxonMobil on a multitude of issues.
“We should be laser focused on changing the royalty to 10 percent and dislodging the ineffable pre-contract cost,” Hinds noted.
He opined that matters such as inflated costs, the rights of a parliamentary oversight committee, fiscal and concession terms review, verification of cost recovery, local content issues, additional environmental protection regulations, windfall profit tax, self-insurance by oil companies, tracking the inflow of oil funds, court action to renegotiate the Petroleum Agreement, and the granting of an oil production licence without a local content plan are all refinements that pale in comparison, for a change to the abusive two percent royalty.

Table showing Oil Projections, Comparative Royalties and Opportunity Losses

Production Well/s	Year	Daily Barrels	Price Per Barrel	Days per Year	Gross Revenue	Royalty	US$
Liza 1	2021	120,000	60	365	2,628,000,000	2%	52,560,000
Liza 1	2021	120,000	60	365	2,628,000,000	10%	262,800,000

Liza 1&2	2023	360,000	60	365	7,884,000,000	2%	157,680,000
Liza 1&2	2023	360,000	60	365	7,884,000,000	10%	788,400,000

Liza 1 &2 & Payara	2024	450,000	60	365	9,855,000,000	2%	197,100,000
Liza 1 &2 & Payara	2024	450,000	60	365	9,855,000,000	10%	985,500,000