ExxonMobil expects to more than double its investment returns from Stabroek deal – Wall Street Journal report

Mar 02, 2020 News

ExxonMobil’s prospects in Guyana are so favourable that the company expects at least a 30 percent return on its investments in Guyana’s Stabroek Block. That amounts to double the 15 percent return the petroleum industry determines to be the lowest necessary to justify investment.

ExxonMobil’s first 15 discoveries in the Stabroek Block have accumulated an estimated 8 billion oil-equivalent barrels.

That is according to a recent report on Guyana’s oil sector by US business newspaper, the Wall Street Journal.
“The deal comes at a good time for Exxon, which has been struggling to maintain its leading status among global oil companies in recent years,” the Journal stated.
Just recently, Exxon’s partner in the block, Hess, announced that the investment cost for the contractors for the Liza-1 project has been revised downward by a total of US$900M. Hess had also said that the breakeven price for Guyana’s oil is among the lowest in the world at US$30 per barrel, and that it is set to fall even further. These are some of the many disclosures by Exxon and its partners about how much their Guyana operations will benefit them.
But even as ExxonMobil and its partners continue to sing the praises of the returns the deal would give them, and the favourability of the Guyana basin, Guyana struggles with heated discourse about whether the deal is fair to the people.
The headline on the WSJ publication describes the Guyana situation in a similar manner as many international publications have. It states “World’s Biggest New Oil Find Turns Guyana Upside Down”.
While the unfairness of the deal to Guyana has been hotly discussed, ExxonMobil refused to comment when the newspaper brought to its attention information from a Cabinet commissioned report by British law firm, Clyde and Co, which states that it pressured the government into signing the deal as soon as possible.
Still, it held firm to the view that Guyana got a fair deal as a first time producer.
“It offers globally competitive terms,” Exxon spokesman Casey Norton told the Wall Street Journal; “It was done at a time where there was significant technical and financial risk.”
The Journal quotes interviews it had with several key personalities, who all say that Guyana could have gotten a better deal with a lengthier negotiation.
Jonathan Gant, senior campaigner at Global Witness, is also quoted, saying “The Guyanese people deserve accountability and transparency into how this deal was negotiated and in whose interest.”
Gant’s urgency is due to an investigation Global Witness led which found that Guyana could lose as much as US$55B from the poorly negotiated deal, even as ExxonMobil and its partners continue to boast about the returns the deal will bring them.
Former petroleum advisor to President David Granger told the Journal, like Global Witness said, that Guyana had immense bargaining power, and that it gave that away.
Crucial to his comments are other statements in the WSJ report that tell of Minister of Natural Resources, Raphael Trotman ignoring advice from multiple experts who advised Guyana secure 10-15 percent in royalty payments. The Journal also reported that, while Trotman was advised to get a team of 10 or 20 negotiators, the deal was signed with just one.
While Trotman agrees that the deal could have been better negotiated, he told the Journal that he has been unfairly villainised, and that he hopes oil money will “soothe hard feelings”.
“I’m a man of great faith and I believe it’s going to be a true blessing for Guyana… I expect it will bring us closer together,” Trotman is quoted as saying.