Exxon's contract puts higher profits for Guyana further out of reach

R e a f f i r m i n g t h e disguised nature with which the Production Sharing Agreement (PSA) allows for the reporting of the cost of production, for each of the hundreds of thousands of barrels produced, each day in the Stabroek Block, Former Head of the Environmental ProtectionAgency(EPA),Dr Vincent Adams, believes the true cost is actually higher than the 75 percent cap being reportedon.

As such, taking into accounttherolloveraspectof the debts above the 75 p e r c e n t c a p i n t h e contract will essentially ensure that any higher profits for Guyana from its producing fields will be placedfurtheroutofreach.

Hewasatthetimeadding his voice to sentiments raised by Professor Kenrick Hunte, who in a recent public missive, posited that because the production cost for each barrel was being reported based on the total revenue of oil produced, it was in fact misleading.

Under the PSA, the operatorisallowedtorecover up to 75 percent of all oil produced daily—minus what is used as part of the operations—to be used as cost recovery, meant to retire initialspending,aswellasthe costs associated with the dailyoperations.

Theremaining25percent is then divided evenly and classifiedasprofitswhiletwo percent of all oil produced andsold,ispaidtothestateas royalty

Former EPA Head, Dr Adams in weighing in, posited that the cost per barrel, based on how the arrangement is structured, would mean it would be as highas95percent.

Expounding further, he noted that analysts continue to cite the 75 percent cost oil cap, as a real or actual number,wheninfactitisnot. He was adamant it is only an artificial number used for calculating profit oil to guarantee Guyana gets its 12.5percent.

“The only thing we know for sure is that for this calculation, Exxon is reporting that it is costing at least 75 percent,” but the real “kicker is that anything over a n d a b o v e t h a t 7 5 percent which we don't know—carries over into the next month, and the next month and compounding on andon.”

Assuch,helamented“the bottomlineis thatwe arejust wasting time trying to calculate the unit cost of production, if we don't know the actual cost The 75 percent is not a real cost numberandbeingmisused.”

To this end, he reiterated, “that is why I keep saying that with no ring fencing, plus the monthly carryover, cost of money, uncertain oil prices, and no Exxon transparency, there is no telling when we will ever get tohigherprofitoiltoincrease ourtake."

Professor Hunte in his recenttakeonthePSAandits nature of disguising the true cost of producing a single barrel had observed that since oil has been extracted and exported from Guyana, there has been no financial statements provided to the public by Esso Exploration and Production Guyana

L i m i t e d (EEPGL) ExxonMobil Guyana. He further charged that no financial data on the average cost of a barrel of oil has been publicized, given that this is an important nonrenewable resource in Guyana'spatrimony

It should be noted however that, while EEPGL and their partners, Hess Guyana Exploration Limited and China National Offshore

C o m p a n y ( C N O O C ) Petroleum Guyana Limited do file annual statements with the Commercial Deeds Registry, these filings are d e v o i d o f d e t a i l e d breakdowns of the expenses, such as the cost of producing abarrelofoil.

According to Professor Hunte, with that information not being in the public domain, “this is a serious concern for the Guyanese people because the best that we can infer about the cost of a barrel of oil is based on a false profit calculation that links total cost with total revenue (TR), such that total cost (TC) is equal to 75 percentoftotalrevenue.

Using this equation, Professor Hunte surmised that the 75 percent cost of production of a barrel of oil, will over time continue to be reflected as increasing, since the cost of production is not being isolated to a particular producing oil, such as the Liza I development, Liza II or imminently Payara and Yellowtail.

He has since posited that this “elevated cost will continue to climb, anytime the price of a barrel of oil increases.”

Conversely, “when the price declines, the average cost per barrel of oil will decline; but this typically does not occur, given the increasing demand for gasoline, oil shortages due to the current war, and the actions of major producers, including the 13 countries that are members of the Organization of the Petroleum Exporting Countries(OPEC).”

To this end, Professor Hunte lamented EEPGL's methodology for its financial reporting as “palpably unacceptable because it is at variance with the cost categoriesidentifiedbyother oil-producingcountries.”

He was adamant that the productioncostforabarrelof oil by several countries, do not include the price of a barrel of oil in the cost function, as it is employed in Guyana.

Instead, “in these countries, the cost function only considers gross taxes, capital spending, production costs, administrative and transportcosts.”

According to Professor Hunte, countries such as Saudi Arabia, followed by Iran and Iraq are the lowest cost producers, with the cost per barrel of oil ranging between US$8 98 to US$10.57 while in contrast, Venezuela,BrazilandtheUK are the high-cost producers with costs per barrel ranging between US$27 62 to US$44.33.

A c c o r d i n g l y, h e disclosed that while cost data for 2020 and 2021 for these countries are not available, a comparison will show that “Guyana is unmistakably a high-cost producer at US$52 86 per barrel in 2021.”

He used the occasion to reiterate that, Guyana's cost per barrel is even higher than the cost in the UK of US$44.33perbarrel,hesaid.

ProfessorHuntehassince posited that since Guyana is advertised as a low-cost producer, given that it has sweet crude oil that is in high demand, together with only two percent royalty, “this relatively high-cost outcome forabarrelofoilinGuyanais indeedsurprising.”

Consequently, he exhorts that “Government must fix this inequity imposed by EEPGL; and exclude total revenue from the cost function; otherwise, the cost of barrel of oil produced by EEPGL will continue to increase as the price of a barrelofoilincreases.”

Georgetown, Guyana.

Publisher: DR. GLENN LALL - TEL: 624-6456

Editor-In-Chief: NIGEL WILLIAMS

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The Fruits Of Partisan Warfare

Historyspeaksrichlyoftheearly,lengthygloryof the Roman Republic that became the Roman Empire. Rome was the world power of its day, andthenitallwenttopieces,withdecayandself-destruction rulingforcenturies.

Leading men consolidated near absolute power in themselves, and a cabal of cronies and elites, while the landless and powerless lived in poverty and helplessness. RomestandsasanabjectlessonofanEmpirethathaditall, thensquandereditall,throughinternalbloodletting,andthe partisanwarsthatpittedmenagainstmen,classagainstclass, leadersagainstsubjects.

Itisthatterm,ruthlesspartisanwarfarethatshouldstrike achordwithGuyanese,ofwhatdestroyedtheRomans. The internal bickering, endless squabbling, draining, selfdestructive wars that knew neither limit nor logic; only that theywere,andtheydamagedbeyondrepair Themessagefor Guyana,everycitizen,ishowhavingitallcouldstillresultin beingleftwithhavingnothingatall.

Today, we, the Guyana people, our approximately 750,000citizens,standontopoftheworld. Intheestimated greatwealthperheadthatisours,intherichpromisethatour destinycouldhold,inallthemeasurements,calculations,and projectionsthatcanbemadeandattachedtous. Wehaveit all,andalltheworldrushestopayhomagetous,sothatwhat canbeextractedfromus,isdonesowithspeed,energy,and skill,andcometopass.

Guyana is the latest, greatest, oil wonder of the modern world. Guyanaisthedarlingofall,theenvyofall,andthejoy ofall. Anditisallbecauseofouralmostovernightoilwealth thatisthestuffoffable.

Yetherewearewastingthemoment,sabotagingourown great flight to the heights. Our biggest thrill is to stick it to neighborandfellowcitizendemonizedashatedadversary

Ourenergiesthatshouldbeconcentratedtofightforthe bestpossiblereturnsfromournaturalresourceendowments are hemorrhaged away with partisan battles that cloud our visions of what could be, that limit our sight of how we are hurting and damaging ourselves in senseless conflict, ongoingcontradictions,everystepofourway

Inparliament,thisistherottedstateofwhatshouldbeour noblestofinstitutions.

Inwhatpassesfornationaldiscourse,exchanges,debate, there is almost never any agreement on where the gaps are, wherewearegoingwrong,andhowwemustturnthecorner, ifonlytogiveourselvesafightingchancewiththegreatgifts thatareours.

In our relationships with each other, there is the folly of disunity, the ugliness of bigotry, and the pervasive disharmony that dogs the existence of Guyanese. This contributesinmanywaystothehorrorandterrorofbeingleft out and falling behind in this time that should be the most rewardinginallourexistence.

The poor resent the powerful; the rich dismiss the demandsofthosewhoarewithout. Leaderslivemoreforlies thanwhatcouldliftupthepeople. Theironyisthatwhenjust afractionofthenation’sextraordinarypatrimonyissetaside forexclusivelythebenefitoftheneedyandpovertystricken, thenthatsamesmallfractioncouldsparktheprosperitiesdue tothelotofthem.

As Guyanese leaders and Guyanese citizens consume themselves in the self-wounding, self-weakening, and selfdefeating, circling predators that covet our wealth prosper from our divisions and deep hatreds, and they grab at the richnessthatbelongstousforthemselves.

Our wars leave us prostrate, our politics mangle us, and ourculturecontinuestokillus. LiketheRomanscaughtin thethroesoftheirself-destruction,itseemsthatwealsoare similarly helpless, and unwilling to stop and start towards a newvision,amoreenrichingdestination.

Oil makes all things possible, but only if we are at our mostsensible. Togethernessmustbefirst.

For,ifitisanyotherway,thenweripourselvesapart,and ourexploiterspickupthepieces.

Thiscannotbewhatthisincomparableoilwealthmeans tous,whatwegifttoourchildren.