Inspenet, October 29, 2023.
In recent days, details have emerged about a disagreement between Guyana and ExxonMobil over the terms of the recent deepwater block auction. This conflict is unfolding at a time when Guyana, a growing oil-producing nation, is seeking to secure a greater share of the wealth generated by its natural resources.
ExxonMobil participated as a bidder in the country’s first competitive auction, which concluded on September 12. However, the conditions of this auction differ from the terms set out in the original contracts signed between ExxonMobil and Guyana in 2016.
ExxonMobil Guyana president Alistair Routledge announced this week that the company will not sign the revised production sharing agreement in its current form. This decision is based on concerns related to the work program schedule and the period stipulated for the transfer of areas.
” There are many approvals required under the new production sharing agreement that I do not believe the Ministry of Natural Resources is prepared to process, review and exercise ,” Routledge stated.
Guyana is open to making “minor adjustments” but does not intend to modify the fundamental elements of the recent agreements, Guyana’s Vice President Bharrat Jagdeo said in recent statements.
” We are not going to weaken them to satisfy ExxonMobil ,” he said. ” If you don’t want to sign them, that’s fine. But Guyana must get a fair share of its resources .”
ExxonMobil leads a group of companies that started oil production in 2019 in the deepwater Stabroek block. Initially, its license was granted through a non-competitive process after direct negotiations between the government and the companies.
Under the new production sharing conditions, beneficiaries will be required to pay a 10% royalty, in contrast to the 2% stipulated in ExxonMobil’s 2016 production sharing agreement.
The current ceiling for cost recovery, which is at 75%, is reduced to 65%. Additionally, post-cost recovery benefits are shared equally between the contractor and the Government.
” These new conditions will double Guyana’s participation, which will go from 14.5% to 27.5%, plus the new 10% corporate tax ,” declared the Government.