Natural Resources Minister Raphael Trotman has said that, over time, Government would be initiating moves to negotiate increased royalties and profits with US oil and gas company ExxonMobil, so as to benefit the people of Guyana.
Speaking to the online oil and gas news agency “Oil Now”, Trotman explained that when ExxonMobil first came to Guyana, in 1999, experts had at that time said the arrangement that Government had then entered with the oil and gas giant was not the best, but was fair, given the risks involved. Now that it has been established that the basin has appreciable quantities of oil and gas, and new contracts are being signed, Government would seek to improve the terms of its agreement with Exxon, in order to obtain an increased share of the revenues flowing from that industry for the people of Guyana.
Government has justified the two per cent royalty it has negotiated by contrasting it with the 50/50 share of the profits that it has negotiated to receive. Government has said this arrangement is a reasonable one, arrived at through the advice of experts. Some had opined that a revenue-sharing arrangement would be a better option than a profit-sharing one.
“Also, the royalties (are) no doubt going to be increased, and of course we will look to perhaps greater profits or greater recovery. At the end of the day, we have experts standing by who will advise and do the negotiations for us,” Trotman told “Oil Now”.
Just recently, responding to concerns about when profits would actually be split between ExxonMobil and Guyana, Trotman had said that Guyana would be paid its two per cent royalty and its percentage share of the profits from the time Exxon first starts extracting oil.
“From the first barrel, Guyana will receive two per cent royalty. It will also receive a percentage of the profits. So 75 per cent of the profits will go towards (Exxon’s) cost recovery… So far, we’re looking at a $5 billion investment,” he had said.
Trotman noted that the remaining 25 per cent of the profits would be split between Guyana, ExxonMobil and its partners. “So 25 per cent will be shared between Government and the partners,” Minister Trotman has stated.
The world market price for oil presently stands at US$50. The resource is, however, notoriously volatile and is vulnerable to the ripples caused by global politics and economics.
“So we’ve worked that out,” Minister Trotman has said. “And at about US$50 a barrel (of oil), Guyana is going to get a lot of money from day one.”
Esso Exploration and Production Guyana Limited (Exxon’s subsidiary) is the operator of the 6.6 million-acre Stabroek Block, and holds a 45 per cent interest therein. Hess Guyana Exploration Ltd. holds a 30 per cent interest therein, and CNOOC Nexen Petroleum Guyana Limited holds a 25 per cent interest as well.
In May 2015, the oil giant ExxonMobil confirmed significant discovery of oil at its Liza 1 exploration well, where more than 295 feet of high-quality oil-bearing sandstone reservoirs were encountered.
In late June 2016, Exxon’s drilling results at Liza 2 revealed more than 58 metres of oil-bearing sandstone reservoirs in Upper Cretaceous formations.
Drilling results confirmed recoverable resources to be between 800 million and 1.4 billion barrels of oil equivalent.