Exxon Guyana’s new projects to add US$19B to cost bank – VP

…US$7B currently in cost bank to be recovered by Exxon

The new projects being embarked on by oil giant ExxonMobil in Guyana’s waters, are expected to add US$19 Billion to the overall cost bank, with US$7 Billion still to be recovered from past expenditure. This is according to Vice President Bharrat Jagdeo.
In his most recent press conference, Jagdeo spoke about ExxonMobil’s recovery of its cost oil, which is capped at 75 per cent of gross revenue under the provisions of the 2016 Production Sharing Agreement.
Up to last year, ExxonMobil Guyana had recovered US$20 Billion in its investments from the Stabroek Block, leaving approximately US$10 Billion to be recovered. During his press conference last week, Jagdeo revealed that as of right now US$7 Billion remained to be recovered.
“I asked the technical staff, how much has been recovered. And what is remaining. And that’s the figure they gave me, that $7 Billion remains in the cost bank at this time,” the Vice President explained.
But with three projects already approved (Yellowtail, Uaru and Whiptail), in addition to one (Hammerhead) which is pending approval, Guyana can expect to have US Billions of dollars more added to the cost bank. As a matter of fact, Jagdeo revealed that they have an estimate for the projects that have already been approved.
“So then what about the approved projects? Its $19 Billion to be added. So, this is to complete all of the approved projects. So, the Yellowtail, Uaru and Whiptail. And a small balance on the Gas-to-Energy. If you add these three to the cost bank, you have to add another $19 Billion there. So that will be the total in the cost bank for all the approved projects,” he said.
Jagdeo also acknowledged the argument that reducing the share the oil company is allowed to recover would have, in the short term, led to more revenue for Guyana. But in the long term, Guyana would have lost out, as there would have had to be less projects approved to make this argument work.
“You’re absolutely right that had there been a smaller share dedicated to amortization of the overall revenue and two, if you had less projects in the cost bank, you’d probably be getting a little more revenue now,” Jagdeo explained.
“But in the future, you would not be getting as much revenue, or you may not even be able to produce much more oil… if you don’t approve additional projects. So, that’s it. It’s a commonsensical thing. Everything stems from the 2016 agreement.”
Exxon, through its local subsidiary Esso Exploration and Production Guyana Limited (EEPGL), is the operator of the Stabroek Block and holds 45 per cent interest in the Block. Hess Guyana Exploration Ltd holds 30 per cent interest, and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds the remaining 25 per cent interest.
The Liza Phase One, Liza Phase Two and Payara projects, which are producing overall more than 600,000 barrels of oil per day, account for the three floating Production, Storage and Offloading (FPSO) vessels operating in Guyana’s offshore Stabroek Block.
ExxonMobil has been present in Guyana since 1999 and initiated exploration activities in 2008. According to the provisions of the 2016 PSA signed under the former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government, 75 per cent of gross revenue goes to cost oil while Guyana gets a total of 14.5 per cent from the remaining revenue and royalty and Exxon gets 10.5 per cent.
Under the new conditions of the model PSA that the People’s Progressive Party/Civic (PPP/C) Government has implemented, the cost recovery ceiling has been lowered from 75 per cent to 65 per cent.
This is in addition to including terms for all future PSAs to feature the retention of the 50-50 profit-sharing after cost recovery; the increase of the royalty from a mere two per cent to a fixed rate of 10 per cent and the imposition of a 10 per cent corporate tax. Additionally, Guyana stands to benefit from as high as US$20 million signature bonuses for the deep-water blocks and US$10 million for the shallow-water blocks based on the model PSA.
The model PSA is being applied to future oil contracts, which will likely be signed once the Government reaches agreements with the companies that were successful at Guyana’s inaugural oil block auction last year.
During the auction, 14 bids in total were received from six companies, for eight of the 14 offshore oil blocks. Exxon was one of the oil companies that submitted bids for the blocks. (G3)