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Guyana will initially earn less than GYD$100 billion in oil profits annually

The Liza well has 800 to 1.2 billion barrels of recoverable oil.

The Liza well has 800 to 1.2 billion barrels of recoverable oil.

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.

  • Col123

    That should be enough. We need to shut down the sugar and rice factories and teach those people to diversify…Why is Trotman protective of those PPP agreement?…Is there something in it for him to get now?…We need to get some political mileage from that PPP agreement …they are on the floor now… one more sucker punch should do it…Is Norton still checking stool for polio?..or is he having his eyes checked?

    • Kassem_B

      Sorry Col123
      Wrong angle
      This hatred not wise when making economic decisions.
      Too many livelihood at stake

      • Col123

        K… sugar and rice is dead under this govt…get used to that fact … even naggie is destined to his rice flour for roti with dahl to sustain his dahl belly!!

  • Pedro

    75/25 is huge for Exxon as in 1990 the price of crude was much higher.Exxons recovery costs must be checked and rechecked for accuracy and to prevent padding, especially as their drilling costs are at least 45% cheaper because of drilling rigs very low rental cost, due to inactivity of over 50% of drilling rigs, in the last four years. At 75% their recovery costs period should be relatively short.

  • Kassem_B

    ‘Guyana will initially earn less than GYD$100 billion in oil profits annually’
    What about the other Options
    1. Putting any extraction on Hold until the economic climate ($/barrel) improve, with no more acreage to ExxonMobil.
    2. Any new Applicant for new acreage must agree to a Refinery On Shore Guyana (not Trinidad or other Caribbean Island)
    3. A joint Guyanese Government and another Oil Major consortium buying the Oil & Gas from ExxonMobil, refined it on Guyana soil and market the product itself.

  • Mother Sally

    This is an agreement that seems cast in stone like those in the Le Repentir Cemetery or what can be seen given the dense jungle it has become. This is an agreement that the Granger Regime inherited and so rather than upset the proverbial apple cart – we have to bite the bullet before Exxon pack up shop and leave us in a sticky quagmire.

    The rule should be to negotiate with other big players globally so we get the best bang for the barrel. We must not place all of our eggs in one basket or in this case – barrel otherwise we will be at the mercy of Exxon-Mobil and slick talking team of cockeyed, gun slinging and tobacco chewing Texans.

    Poor Trotman seems to have found himself immersed between ‘a rock and a hard place’ so let us pray and hope that the Viking marauders from Norway don’t send him off to Valhalla come time to join the EITI and when case he might just need ET to rescue us. Harmon has a direct line to ET.

  • Col123

    Thanks..I am aware of the govt in 1990..I am just reducing the pressure off Trotman …

    • faoud khan

      I endorse your bewiderment!!! very refreshing to know someone else thinks Trotman is already back in the folds of his former party!

  • Rayd

    According to this deal, if the money earned from the oil is distributed to population, then every Guyanese will get about US $12 a month…that doesn’t look like a good deal to me.