Guyana lost US$443M in 6 months for failing to renegotiate Exxon contract

Jul 09, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – Guyana has missed out on a staggering sum of US$443 million due to its continued failure to apply a 10% royalty rate to the Stabroek Block in 2023. This revelation comes as the country’s receipts of oil revenues totaling US$658 million in the first half of this year, were published in The Official Gazette. As the government expects to get US$1.63B in 2023, the amount received represents about 40%.

The revenue generated by Guyana can be attributed to the fiscal terms outlined in the 2016 Stabroek Block Production Sharing Agreement (PSA). Under this agreement, the country has received approximately US$547 million in profit oil revenues and around US$111 million in royalties. However, if the newer model PSA, which mandates a 10% royalty rate, had been applied to the Stabroek Block, Guyana could have secured an additional US$443 million in royalties during the first half of 2023.

This substantial loss is primarily attributed to the government’s decision not to adopt the new model terms for the Stabroek Block.

The significant loss of US$443 million in royalties for Guyana underscores the need for the government to reassess its approach to the Stabroek Block and consider implementing the new model PSA terms to maximize the country’s revenue potential. With the future projects on the horizon, it becomes even more critical for Guyana to ensure a fair and beneficial agreement that protects its interests.

The government has also withdrawn a substantial amount of US$400 million from the fund to supplement the annual budget. The exact balance and market value of the fund as of June 30 remain unknown as the Natural Resource Fund reports for June and the second quarter of 2023 have not been released yet.

The Stabroek Block, operated by ExxonMobil affiliate Esso Exploration and Production Guyana Limited, has been a significant source of oil production for Guyana. The Liza Phase 1 Development commenced production in late 2019 and reached its peak capacity of 120,000 barrels per day (bpd) in December 2020. Subsequently, Liza Phase 2 began production in February 2022 and achieved its full capacity of 220,000 bpd by the end of December 2022.

However, concerns have been raised regarding ExxonMobil’s continued efforts to push production beyond design capacities at both projects. This has not only sparked apprehension among Guyanese environmentalists but has also drawn scrutiny from some shareholders of the company. ExxonMobil plans to initiate four additional projects within the next 4-5 years, with oil production expected to surpass a staggering one million barrels per day.

The Stabroek Block is estimated to possess approximately 11 billion oil-equivalent barrels of resources. While ExxonMobil holds a 45% interest in the block, Hess Guyana Exploration Ltd. retains a 30% interest, and CNOOC Petroleum Guyana Limited possesses the remaining 25%.

ExxonMobil, June, second, significant, Stabroek Block

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