Jul 30, 2021 News
Kaieteur News – In light of ExxonMobil’s recent announcement that more oil was found at the Whiptail-1 and Whiptail-2 wells in Stabroek Block, an international financial group has come forward to expose what this truly means for the people of Guyana.
According to the Institute of Energy Economics and Financial Analysis (IEEFA), more discoveries in the Stabroek Block only mean little for the citizenry given the absence of ring-fencing provisions in the Production Sharing Agreement (PSA) governing the block.
Kaieteur News along with several regional and international stakeholders have stressed since 2015, the importance of having this provision in the PSA as it would prevent ExxonMobil from deducting expenses associated with other projects against a producing field.
This is currently taking place with the Liza Phase One Project. In the absence of a ring-fencing provision, ExxonMobil and its partners are deducting costs associated with the Liza Phase Two and Payara Projects against the Liza Phase One Project. In doing so, the already small profit to be split with the Guyana gets even smaller.
In a report titled: “Lack of Ring-Fencing Provision Means Guyana Won’t Realize Oil Gains Before 2030s, if at All” by IEEFA’s Director of Financial Analysis, Tom Sanzillo, the devastating effects of failing to have this provision are highlighted.
In the 14-page document, Sanzillo notes that ExxonMobil has already received approval of the Payara field and even made discoveries at Yellowtail, Longtail, Uaru, Redtail, Mako, Tripletail and Whiptail in the Stabroek Block. Sanzillo noted however that all of the associated costs are being charged against the Liza Phase One Project thus reducing Guyana’s share of the profits.
By IEEFA’s estimates, Guyana should receive upward of US$6 billion annually by 2028 or sooner but, because of all of these new costs, which neither ExxonMobil nor the government is disclosing, IEEFA’S Director of Financial Analysis posits, “Guyana will be shortchanged until the 2030s, if not longer.”
Sanzillo also stressed that the recent announcement of a discovery at the Whiptail site may help ExxonMobil’s stock price but said one ought to be aware of the reality that it ultimately reduces Guyana’s profits.
He said, “The lack of contract protections means that every time Guyana announces it has received more revenue, it is actually being shortchanged.”
From a global perspective, Sanzillo said Guyana ought to pay attention to the fact that the oil and gas industry is facing stiff competition and lower growth expectations. On this note, he said Guyana selling more oil in an overcrowded market would be “risky business” as it may never see the promised annual revenues in the billions of dollars.
When the foregoing issues are placed alongside the fact that the true costs of ExxonMobil’s projects, its new discoveries, and its dry holes remain unknown, Sanzillo alluded that the Stabroek Block deal essentially leaves the people of Guyana in a dark abyss of worrisome financial risks.
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