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By foregoing oil profits, Exxon admits Guyana is a co-investor in Stabroek Block
Kaieteur News – In the absence of a ring-fencing provision, President of ExxonMobil Guyana Limited (EMGL), Alistair Routledge has agreed that Guyana is a co-investor in the Stabroek Block.
ExxonMobil Guyana Country Manager, Alistair Routledge
Ring-fencing means that each oil project should pay for itself. It would also allow the country to benefit from 50 percent of profits at individual projects after expenses have been recovered or repaid to the Contractor.
Guyana, however, has been foregoing billions in US-dollars each year that is used up by the Stabroek Block co-venturers, Exxon, Hess and CNOOC, to develop the vast resources discovered offshore. Be that as it may, the country does not benefit from a significant portion of the profits; instead, it receives a meagre 14.5 percent share.
Guyana also does not have a seat at the table to make investment decisions and determining relevant expenditure, although it carries this title. The country has instead settled to audit the company’s expenses after they have been incurred.
On Tuesday, during Exxon’s first press engagement for 2024, Routledge in response to a question from this publication explained that Guyana is a co-investor in the Stabroek Block, though it does not take money out of its treasury for this purpose.
“In essence the country is a co-investor, that’s the nature of our Production Sharing Agreement. You share in the upside of the investments that are being made. The good news is, the country doesn’t have to put any capital at risk, doesn’t have to find the capital to make the investment upfront,” he said.
The Country Manager went on to point out that to date the Co-Venturers have invested US$29 billion, while Guyana has not taken resources from the public purse to finance the oil and gas operations.
“There’s no dollars [that] comes out of the treasury from the country and yet its making- in financial terms- infinite returns on a zero investment,” Routledge said.
Kaieteur News had asked the Exxon official whether he believes the country should benefit more, given that its profits are being shortened to invest across the Block.
To this end, he noted, “Well I think the profits are significant. You think about it in economic terms…so its zero risk but generating billions. I mean to date the country into the Natural Resource Fund; there’s been over US$3.6 billion that have been paid. Of that, US$1.6B was paid last year alone so you can see that this is accelerating as production increases and its gonna continue to do so as we go from this year.”
The Country Manager told this newspaper that Guyana may want to pursue a different model agreement in the future; however the country would do so at its own risk.
“Does Guyana in the future want to have a different model, there are countries around the world who in the early days start with a PSA but then in the future decide that they want to have a licensing round with a different contract structure and that’s entirely viable, it’s up to the country on what risk it wants to take with the nation’s financial resources and whether it wants to play that game,” he explained.
Previously, Vice President Bharrat Jagdeo said that the arrangement Guyana currently has with ExxonMobil and partners to develop the country’s oil endowment, does not afford the nation a “co-management” position. He was addressing concerns relative to the company’s expenses when he explained that the lack of a co-management position does not allow the country insights into the companies’ spending to ensure beforehand, that Guyana is not being given bills with inflated costs for goods and services needed within the sector.
“There is no provision in the contract for co-management,” Jagdeo clarified.
He continued, “Although we are entitled to 50 percent of the profit; they manage. There is an operator that operates on behalf of the shareholders that run the company.” Read more in the link below: https://www.kaieteurnewsonline.com/2022/08/20/in-tribute-to-bibi-shadick/
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