Close to US$1B flowed into oil account in September
(Kaieteur News) – Guyana’s Natural Resource Fund (NRF) or its oil account in September received close to one billion US-dollars, resembling earnings from the previous month.
According to the receipt published by the Bank of Guyana (BoG), the country received a whopping US$768 million last month in profit oil. The document does not specify how many barrels were produced and sold during the month. It however details a withdrawal from the account by the GoG amounting to US$200M or GYD$41.7B in September.
Consequently, the closing balance at the end of September was approximately US$5.5B.
The country is now receiving 39.8% of profits generated in the Stabroek Block and an additional 2% royalty.
Guyana’s share of profits finally grew in August when the country collected US$778M using an exchange rate of $208 for one USD. The revenue for August included profit oil and a signing bonus payment.
It was reported that ExxonMobil has recovered its US$55B investments in Guyana, positioning the country to receive a higher share of profits from the oil produced in the Stabroek Block.
Currently, four projects are producing about 900,000 barrels of oil per day (bpd). The company is progressing development activities to bring the additional projects on stream by 2029. Guyana’s production will surpass one million barrels per day before the end of 2026 as the fifth project, Uaru will add approximately 250,000 barrels. The Floating Production Storage and Offloading vessel (FPSO) for that project has already arrived in Guyana.
But while the country enjoys increased revenues from the sector, its sudden bounty could be impacted by oil prices. While a sudden change in oil prices is beyond the control of the state, government can take steps to prevent the profits from falling again. If the GoG approves more projects for Exxon without changing the existing arrangements, Guyana’s share of profits could again slide from 39.8% to a meagre 12.5%.
The oil contract and cost recovery
In accordance with the terms of the 2016 Production Sharing Agreement (PSA), Exxon was allowed to take out 75% of the oil produced in Guyana each month until all of the company’s investments were repaid.
The remaining 25% of oil each month was split between Guyana and the contractors, with the country receiving half of the “profit oil” or 12.5%. The country’s profit share has now increased since the cost of all projects approved to date have been repaid; but this does not mean the cost bank is empty as operational, exploration and other expenses still exist. Consequently, the President said 20% of production has been set aside in the new formula for costs.
In the meantime, ExxonMobil is currently pursuing at least two new projects in the Stabroek Block – its eighth and ninth, which will add more expenses to the cost bank. Without implementing new systems like a ring-fencing provision, Guyana’s profit share could again fall to allow the operator to finance these multibillion U.S-dollar projects.
As such, President Irfaan Ali assured that the GoG will seek expert advice on the financing of future developments. Kaieteur News specifically asked the Head-of-State to explain how new projects would be governed, whether Guyana would allow its share of profits to be invested into upcoming developments and if government would then seek a greater share of revenue as an investor.
Source: Kaieteur News
