Guyana will earn about GYD$42 billion per year if ExxonMobil begins producing oil at today’s Brent Crude price of US$46.22 per barrel, based on the revenue sharing formula that has been agreed between the two sides more than 10 years ago.
Based on projections that the price of oil could increase to as much as US$79 per barrel in 2021 when the company is scheduled to begin commercial production, Guyana can in fact rake in US$355,500,000 (GYD$73.233 billion) per year from the Liza well alone.
These are unofficial calculations and they do not take into consideration inflation, exchange rate movements and the possibility of ExxonMobil finding more oil. Put in perspective, conservatively, oil revenues could be about one- third of Guyana’s latest national budget of US$1,116,504,854
Minister of Natural Resources, Raphael Trotman said after ExxonMobil recovers its cost of investment, Guyana will receive a much larger share from the deal. Exxon Mobil officials said earlier this week that they have already spent billions of US dollars on seismic surveys and exploration activities 200 kilometers offshore Guyana.
Trotman said the formula provides for ExxonMobil to get 75 percent of the cost of a barrel per oil as cost oil to allow the company to recover the cost of its investment. The remaining 25 percent is split equally between Guyana and the company as profit oil.
With ExxonMobil planning to pump an estimated 100,000 barrels per day, this means that the company will at today’s Brent crude price of US$46.22 get US$34.66 per barrel or US$3,466,000 per day/ US$103,980,000 per month/US$1,247,760,000 per year.
At the same Brent Crude price, ExxonMobil and Guyana will each split the remaining US$11.55 per barrel profit oil equally to get US$5.77 barrel. At 100,000 barrels per day, the company and the country will each get US$577,000 per day/ US$17,310,000 per month/ US$207,720,000, (GYD$42,790, 320,000).
The company intends to begin commercial production at its Liza well by 2021. By then, according to some experts, the estimated Brent crude price could be US$79 per barrel and rising due to the exhaustion of cheap oil sources, increasing demand and higher cost of production.
At US$79 per barrel in 2021, ExxonMobil will be entitled to cost oil recovery amounting to US$59.25 per barrel/ US$5,925,000 per 100,000 barrels per day/ US$177,750,00 per month/ US$2, 133, 000 000 per year
For Guyana, the remain 25 percent or US$19.75 would have to be evenly split with ExxonMobil amounting to US$9.875 per barrel/ US$987,500 per day from 100,000 barrels/ US$29,625,000 per month/ US$355,500,000 (GYD73,2 billion annually)
Trotman ruled out a change of the existing 75/25 formula enshrined in the Production Sharing Agreement . “We respect the sanctity of agreements but in every possible way we are going to trying to get the best for Guyana,” he told Demerara Waves Online News
He assured that Guyana would not be breaking the contract but intend to bargain for contributions in the area of Corporate Social Responsibility to assist with capacity building, the inclusion of a royalty and an increase of rental fees which now stands at US$250,000 per year.
The Minister said the current Production Sharing Agreement with ExxonMobil appeared to have been the best that Guyana could have gotten in 1990 at the time when the prospects of finding commercially quantified oil in Guyana appeared dim and the risk was probably high.
While Guyana would not be breaking the contract because of implications that would have for the country’s investment climate, he said in future oil deals, Guyanese negotiators would be pushing for 50/50 or 60/40.