On August 1st, Kiskadee Watch reported that ExxonMobil’s Chief Financial Officer Neil Hansen had disclosed in an interview the day before with Reuters that its joint venture here had recovered the US$55b it had invested to develop the Stabroek Block and that as a consequence Guyana would now receive more oil money.
This disclosure had been made on July 31st during its 2nd quarter earnings call – typically the type of forum where it plays up its performance to boost its share price and attract more investment and lending interest. While its oil volume from the Stabroek Block would fall, its free cash flow would rise – the type of disclosure that titillates the market.
It had come as no surprise that the US$55b investment recovery point was approaching based on the volumes extracted from the Liza-1, Liza-2, Payara and Yellowtail projects, the average cost of production of a barrel and the average cost per barrel sold on the market particularly in the months of the US/Israeli war with Iran.
What was a surprise was that the state of Guyana as the sovereign holder of the oil wealth in the Atlantic would permit ExxonMobil to make such a statement at its earnings call without a parallel announcement by the Government of Guyana here setting out the implications of the recovery of the investment and the appurtenant details.
It was not until August 18 – nineteen days after the ExxonMobil announcement as reported by Kiskadee Watch – that any authoritative statement was made by the Guyana Government on this matter. At one of his very infrequent press conferences, President Ali disclosed that with the recovery of the US$55b investment – two years before the projected time – Guyana’s share of profit oil produced from the Stabroek Block had risen from 12.5% to approximately 39.8%.
If the Government of Guyana had had any respect for itself let alone for the people of the country it would have ensured that a joint statement would be made about this inflection point. Had there been a Petroleum Commission (PC) in this country as had been promised by the PPP/C government then one would have expected that there would have been constant communication between the PC and ExxonMobil about the recovery of its investment and the approach of the desaturation point. This would then have required discussions on the cost of production across the block – the major sole determinant now in the profit calculus – and the projection for the next five or 10 years.
Nothing like that occurred.
So now that all the cards are on the table answers have to be provided to the public by the Guyana Government presumably after it has apprised itself of the relevant facts.
-Over what period and which particular projects does the US$55b pertain to? Is this recovery for the first four projects plus the three to come on line: Uaru, Whiptail and Hammerhead? Does this also include the pipeline for the gas to energy project? It is mind-boggling that the people of this country have to ask for such information and that it is not readily available on a locally controlled database with real-time updates.
-At which point did the 39.8% kick in? From the day that ExxonMobil declared it or when Guyana and ExxonMobil agreed that the point had arrived? Is it March, April, May? Even the government must understand that there is a formal start date to enable tracking of the additional oil lifts that must come to the country.
-When could the cost bank potentially begin to build up again and what is the permitting process for this? Will potential projects eight and nine begin contributing to a cost bank and shouldn’t the Government of Guyana say no to this?
-What progress has the Government of Guyana made in validating the accuracy of the US$55b in cost recovery? Shockingly, no audit of oil expenditure has been completed. It is the height of dereliction of duty to have ExxonMobil declare that it has recovered its US$55b without the Government of Guyana on behalf of the state and its people being able to say it agreed or disagreed with the figure.
The first audit of ExxonMobil expenditure for the period 1999 to 2017 was commissioned under the APNU+AFC government and was done by the UK firm IHS Markit. The final version of the IHS Markit report after reconciliations was submitted to the PPP/C government in March 2021. That report remained hidden from public view until a news item on its findings appeared in the April 2nd, 2023, Sunday Stabroek. Among the major findings in the audit report was that 12.8 percent (US$214.4 million) of the US$1.67 billion in expenses claimed by ExxonMobil and its partners could be disputed by the Guyana Government. More than five years later that the audit cycle has not been completed and on the face of it ExxonMobil still owes Guyana US$107m from that same US$55b cost bank.
Since then two other audits of much larger sums have been contracted by the Guyana Government to VHE Consulting, a group whose capacity to undertake these tasks has been questioned. Neither of those two audits has been completed to date.
The public should be aware that if the Government of Guyana had insisted on ring fencing of the earliest projects; Liza-1 and Liza-2, the people of this country would have already been earning a 39.8% take on these two projects as opposed to having to defer this date until sums for projects three, four, five, six and seven were recovered.
There is one other obscenity about Guyana’s profit that the people of this country should wake up to. Yes, we will be getting 39.8% of the oil as profit. Guess who is also getting 39.8% of the profit? Yes, you guessed it, ExxonMobil and its partners in the Stabroek Block. That should never have been the case as Guyana has been in a strong position over the last five years particularly to seek a higher share of returns through royalty, actual profit and taxes on the oil companies. The PPP/C government has simply refused to defend the country’s interests.
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