Exxon robbed Guyana over US$208M in royalty in three years - Professor Hunte

Exxon robbed Guyana over US$208M in royalty in three years – Professor Hunte

Mar 07, 2024 ExxonMobil, News, Oil & Gas

Kaieteur News – Guyana has so far lost over US$208M in royalty on the sweet light crude being produced by ExxonMobil in the Stabroek Block.

Professor and Former Ambassador, Dr. Kenrick Hunte

This is according to former Ambassador and Professor, Dr. Kenrick Hunte. ExxonMobil Guyana Limited (EMGL), the operator of the resource-rich Stabroek Block is mandated to pay the state two percent royalty on “all petroleum produced and sold” in keeping with the parameters of the 2016 Production Sharing Agreement (PSA). Royalty is a fixed percentage of the gross value of revenue, paid to governments or the owners of natural resources.

Exxon however has been allegedly paying Guyana royalty from its share of profits, thereby significantly reducing the state’s earnings. Dr. Kenrick Hunte in a letter to Kaieteur News on Sunday explained that Guyana was merely receiving 0.5% instead of the contractually agreed 2%. Dr. Hunte said that the oil giant has been deducting 75% of the monthly earnings in the Stabroek Block to recover its investments, and from the remaining 25% Guyana receives 50%, which is equivalent to 12.5% of the total revenues earned. Exxon then hands Guyana a share of its earnings, valued at two percent.

The Guyanese scholar explained, “In the circumstances, it is contended that this act by EMGL, which uses its profit share to pay Guyana’s royalty, violates the condition of Article 15.6 in the PSA; it robs Guyana of its correct royalty payment; and this approach by EMGL generates a smaller share of total sales for Guyana.”

To this end, Professor Hunte argued that Guyana is only receiving 0.5% royalty and not the 2%. He was keen to note that while some might think that 1.5 percent of total sales is insignificant, when managing billions of dollars, the shortfall can be costly. To support his argument, Dr. Hunte used the Bank of Guyana’s 2022 Annual Report to underscore the revenue loss for this country.

Table showing the value of the lost royalty payments

He explained that the report notes oil exports during the period 2020 to 2022 amounted to US$13.9B. Immediately, he calculated that1.5 percent of this value is US$208.7M. In comparing the lost royalty payments to earnings from the other traditional exports, Dr. Hunte determined that Exxon pocketed more money than was generated by the sugar and timber sectors during the same period. Please see table attached. He said, “In contrast, when Guyana is shortchanged by 1.5% in oil sales (US$208.7 million), this loss is greater than the total export earnings from sugar and timber in the amount of US$137.47M.”

The former Ambassador pointed out that this lost revenue and well as the millions in uncollected profit taxes could have made a significant contribution to the teachers, who provide a key corner-stone in Guyana’s foundation.

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Dr Kenrick Hunte, ExxonMobil Guyana Limited (EMGL), Former Ambassador and Professor, Guyana, Stabroek

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