Guyana will have new opportunity to do better with Stabroek Block after 2026

May 08, 2023 News

Kaieteur News – Guyana has the opportunity to finally give the Stabroek Block the respect it deserves when ExxonMobil relinquishes it in 2026.
Once the license expires, Guyana will be able to break the hold of the Production Sharing Agreement (PSA), widely criticized for its lopsided terms, on very valuable offshore acreage.

Guyana can then auction off the acreage to other qualified explorers and potentially break up the block into several smaller ones, fostering competition offshore.
Guyana would be able to subject the new blocks to the model production sharing agreement which was introduced this year.

It features a 10% royalty rate and lowers the cost recovery ceiling from 75% to 65%, which will give the government better terms for the new blocks. Guyana will also be able to tax the profits of the new contractors.
Furthermore, once the block is broken up and auctioned, Guyana could earn hundreds of millions of US dollars in signing bonuses, much more representative of the value of the acreage than the US$18 million the government received in 2016, which had been kept hidden from the public.

This time around, the government will be able to get better terms for the new blocks and secure larger signing bonuses.
Questions have persisted over the years as to why ExxonMobil was awarded a block that was sized 10 times the amount that should be allowed. The former Minister of Natural Resources, Raphael Trotman, said in 2018 that the award to ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), was legal. He has argued that there were national security considerations involved in handling such considerable acreage to the ExxonMobil-led consortium, in the face of Venezuela’s claims for Guyana’s Essequibo region. The first time the award was done was in 1999 under the PPP/C, and then again in 2016, under the David Granger administration. Neither government attempted to claw back the excess acreage that was granted to ExxonMobil.
However, this time around, Guyana has the opportunity to break the block up into several blocks and foster a new age of fairness in this sector, giving Guyana an equitable share of revenues from potential projects in the future.
ExxonMobil has been able to lock in five developments with the current terms, and is likely to pursue increasing this number to 10 before losing the block. The company’s approved projects will see Guyana producing more than a million barrels of crude per day by 2026. The company plans to drill at least 10 wells every year so it can find as many barrels as possible to add to the 11 billion oil-equivalent barrels it accumulated over the years.

Vice President Dr. Bharrat Jagdeo has described the fiscal terms of the Stabroek block PSA as one of the worst, and has said that it was a ‘shitty’ deal. Even though he holds this view, Jagdeo has consistently argued for the protection of sanctity of contracts, in his refusal to renegotiate the deal.

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