Aug 01, 2021 News
Stabroek Block deal offers worrying financial risks…
Kaieteur News – Since production started in 2019, the unusually lopsided provisions of the Stabroek Block Production Sharing Agreement (PSA) allow the lion’s share of the profits made on Guyana’s oil resources to flow into the pockets of ExxonMobil, Hess Corporation and CNOOC Petroleum Guyana Limited. This state of affairs is one that has left many industry stakeholders in a perpetual state of sadness and worry for the people of Guyana.
But what has troubled industry stakeholders even more is the absence of key information to the citizenry about their resources. Just recently for example, the Institute for Energy Economics and Financial Analysis (IEEFA) pointed out that the country remains in the dark about the actual total development costs needed to reach the maximum amount of extractable oil for ExxonMobil’s Liza Phase One, Liza Phase Two and Payara projects. To date, only estimates remain in the public domain. Kaieteur News had previously reported that the Liza Phase One Project stands at US$3.5B, Liza Phase Two at US$6.6B, and Payara at US$9B.
In a special report on the financial risks facing Guyana with the Stabroek Block deal, it was also pointed out that the contractor has not disclosed the costs of dry holes and new discoveries such as ones recently made at the Stabroek Block’s Whiptail-1 and Whiptail-2 wells. IEEFA stressed that this information should be made public.
What are also kept away from public eyes, the Institute said, are oil price projections, a key factor in estimating the rate and level of cost recovery by the contractor.
Further to this, the report’s author, IEEFA’s Director of Financial Analysis, Tom Sanzillo was keen to note that he finds it astounding that the discoveries offshore in the Stabroek Block have been celebrated on very occasion as though they are tantamount to being evidence that future revenues will be robust. He said this is far from the case, especially when one places it against the backdrop that none of the announcements have been met with an accounting of the exploration costs much less a discussion of how they will be paid. What also makes matters worse are the numerous provisions of the contract which place the lion’s share of the profits into the pockets of the oil companies and their shareholders.
Kaieteur News recently exposed as well that there is an absence of key information when it comes to the local content reports of ExxonMobil and its partners. Since assuming office, neither President Irfaan Ali nor Vice President Dr. Bharrat Jagdeo has ensured the release of ExxonMobil’s local content reports, which are submitted to the State on an annual and biannual basis. In fact, tomorrow will make one year since the Ali government has been in office and the public is none the wiser about the oil giant’s true performance on hiring and training locals and using Indigenous products and services for the period 2016 to 2021.
According to the 2016 Production Sharing Agreement (PSA) that was signed for the Stabroek Block, Article 18 speaks to the use of Guyanese Resources. It specifically states, “Within 60 days prior to the beginning of each year or part thereof as applicable, the Contractor and the Minister shall provide a yearly plan for the utilisation of qualified Guyanese resources for the upcoming year. Following the submission of the plan, the Contractor and the Minister shall meet to discuss and consider the effectiveness of the plan.” Since being in office, the PPP/C Administration has said nothing about its engagements with ExxonMobil on this front, especially as it relates to the local content utilisation plan for 2021.Article 18 goes on to state, “The Contractor shall provide half-yearly reports submitted within 30 days after the end of each half-year to the Minister outlining its achievements in utilising qualified Guyanese resources during the previous half-year and make appropriate adjustments to the yearly plan to better accomplish the goal of increasing the qualified resources available for use by the Contractor in its Petroleum Operations and other entities performing petroleum operations in Guyana.”
To date, neither the Head of State nor the Vice President has disclosed these reports for the public to peruse and hold the oil companies accountable. Neither has also informed the nation about whether they reviewed previous local content reports submitted by Exxon and partners and whether those were satisfactory and in keeping with the PSA’s call for increased use of Guyanese services and skills.
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