Latest update April 25th, 2024 12:59 AM
Dec 12, 2022 News
Kaieteur News – The country’s manager of the petroleum sector, Vice President Bharrat Jagdeo is throwing his support behind American oil major, ExxonMobil’s calculation, that Guyana’s total take of revenue from the oil and gas sector is a whopping 52 percent.
Jagdeo, an Economist, was asked to weigh in on the issue on Friday following the placement of a number of billboards by the oil company across Guyana. These billboards claim among other things that Guyana benefits from 52 percent of all the profits from oil and gas.
The VP explained, “I saw how they are claiming the 52 (percent)- 50 percent from profit oil and then 52. That might not be the most egregious thing because it is accurate that 52 percent. If you look at how it’s calculated, so its 50 percent of the profits.”
He was reminded that 75 percent of the revenue is first deducted to cover the operator’s expense, in keeping with the lopsided Stabroek Block Production Sharing Agreement (PSA) and was asked to explain how this calculation would be accurate.
After pausing, he then responded, “If you look at the lifecycle, normally you look at the lifecycle of the project. It can’t be done simply. So if you look at the lifecycle at 50- we had the simulations done- of $50, $60 and $100. So this is, here if this is $100, it works out to about 49 to 50 percent. If its $50 over the lifecycle of the project, it’s close to 50 something percent, 56 percent.”
He stressed that in determining Guyana’s share, factors such as the number of production years and number of barrels produced must be considered and then multiplied by the price per barrel at $50.
As such he said, “No, I don’t think that is misleading, there might be other things I do not agree with but I don’t think that’s misleading.”
Speaking on the issue, the publisher of this newspaper, Mr. Glenn Lall said citizens need to know that the cost to erect the very billboard is being recovered by ExxonMobil based on the lopsided contract it signed with the Guyana Government.
“ExxonMobil is spending millions, further shortening our share to build and erect huge billboards, to tell us the Guyanese people we are getting 52% out of the Stabroek Block,” Lall stated. He asked, “52% of what? Not the whole apple, but 52% of a ¼ of the total revenue made.”
He added that what Exxon should have been telling Guyanese on those huge billboards, who is getting the ¾ of the apple plus the other half of the quarter apple which remains. “It is mind boggling, that these guys can put up billboards staring us in our faces to mislead all of us and our Leaders, all of them are silent.”
Following his statement on the front page of Kaieteur News last Tuesday, Exxon issued a response insisting that the billboards erected across the country are not being recovered as an expense. The company’s Media Advisor, Kwesi Isles, in a letter to this newspaper maintained that the information presented on the billboards are factual.
Isles explained, “The information displayed on the billboard in question is factual and can be verified. It is no secret that the 2016 Production Sharing Agreement (PSA) allows the Stabroek block co-venturers (CoVs) to recover their investments – up to 75 percent of oil produced and sold in a given month.”
Subsequently, the Exxon representative noted that all profits over and above the cost to find, develop and produce oil are split 50/50 between the Government of Guyana and the CoVs.
“An additional two percent of all oil produced and sold is paid out to the Government as a royalty and comes out of the CoVs share of the profit. The result is 52 percent of all profit goes to the Government of Guyana,” the company said.
Notwithstanding Exxon’s claims, the Kaieteur News Publisher maintains his position. “When I see the financial statements along with the bills to show Guyana that this billboard cost is not coming out as cost oil then I will withdraw my comments,” Lall said in response to Exxon’s letter.
Further, Lall asserted his position on the ExxonMobil billboards mounted at several locations in the country. “I also stand my ground as to the billboard comments. I am maintaining the information on the billboard is misleading and that Exxon should tell the Guyanese people the whole truth.”
In fact, he argued that the response from the multinational company has failed to address the misleading information on the billboard. According to that poster, planted at the Demerara Harbour Bridge junction in Region Three Guyana has received more than $280B since oil production started here late 2019, as 52 percent of the profits goes to the country.
Warnings from International Energy Organization
It must be noted that Guyana has been warned on numerous occasions in the past that the 2016 PSA may never allow Guyana to see the promised annual revenues from its oil sector, as the “one-sided” oil contract gives ExxonMobil and its partners the benefit, leaving Guyana and its people out of their fair share of the wealth.
This is the view of the Institute for Energy Economics and Financial Analysis (IEEFA), an independent organization that examines issues related to energy markets, trends and policies.
According to one of its reports titled ‘Lack of Ring-Fencing Provision Means Guyana Won’t Realize Oil Gains Before 2030s, if at All- Loophole Allows ExxonMobil-Led Development Team To Use Profits To Pay for More Oil Exploration in Guyana’ details that Guyana’s failure to implement a “ring fence” provision has provided Exxon an opportunity to reduce the country’s share of profits.
According to the document, “Among the contract’s weak provisions, Guyana never imposed a “ring fence,” which means that the oil companies can charge the government for costs incurred for new development and pay for it out of the revenues from Liza Phase One, an oil field that commenced production in December 2019. A strong ring fence provision would have allowed ExxonMobil to charge only costs related to Liza Phase One against revenues received from oil from that field.”
The Institute went on to say that Guyana only received US$344 million in the first 16 months of production.
To date, ExxonMobil has received approval for four projects, including Liza One and Two, Payara and more recently, the Yellowtail development. In addition, the company also made several other discoveries, along with about four dry holes, of which the costs are being charged against the oil produced at the Liza One well. This, the report says, reduces Guyana’s share of the profits.
IEEFA estimated that Guyana should receive upward of $6 billion annually by 2028 or sooner. However, the organization believes that due to all of these new costs, Guyana will be short-changed until the 2030’s, if not longer.
Tom Sanzillo, a director of financial analysis for IEEFA said, “The lack of contract protections means that every time Guyana announces it has received more revenue, it is actually being short-changed.”
To this end, IEEFA said its findings suggest there is much work to be done on the oil agreement before Guyana could enjoy the benefits of its offshore resources. The institute added, that the government’s considerations of a new gas project is troubling, considering the importance of the outstanding issues with the oil contract.
Jagdeo giving Exxon 102 cent to collect 2 cent.
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