In Friday’s 97th instalment in his seminal series in Stabroek News on the oil and gas industry, chartered accountant and commentator Christopher Ram has developed a series of stunning statistics and insights into the earnings of the three partners in the lucrative Stabroek Block for the year 2021 compared to Guyana.
After reviewing the financials for ExxonMobil’s subsidiary here, Esso Exploration and Production Guyana Limited (EEPGL), Hess and CNOOC, Mr Ram noted that the total government revenue in 2021 was $351,544m of which 76% came from tax revenues and only 24% from oil revenues. On the other hand, inclusive of tax credits, the three partners in the Stabroek Block netted $393,191m in 2021 from their Guyana operations.
In other words he said that Esso and its partners had made more money in 2021 from the Stabroek Block than all the money raised by the whole of the Government in 2021, including its takings from oil.
Exclusive of tax credits, the three oil companies earned $314,553m from the petroleum operations while the Government earned in profit share $74,479m, a ratio of 4.22: 1.
Furthermore, the earnings of the three oil companies from the petroleum operations were 3.7 times the earnings of the Government from those operations, inclusive of royalties. Part of the disparity of these two ratios, he said, is attributable to the recovery of previous years’ expenses in full.
Mr Ram also pointed out that Article 15.4 of the Production Sharing Agreement requires that the tax liability computed under the Income Tax Act and the Corporation Tax Act be paid to the Guyana Revenue Authority (GRA) on behalf of the oil company and that “such sum will be considered income of the oil company”. For 2021, the tax figure for the three companies was a whopping $78,638m.
The 2021 figures pertain to oil extraction from the Liza-1 well at a rated capacity of 120,000 barrels of oil per day. The 2022 figures will be based on extraction from Liza-1 plus Liza-2 which has a rated capacity of 220,000 barrels per day. One can only imagine what the gigantic earnings of EEPGL and its partners will be this year and in the future on Guyana’s non-renewable oil resources.
The PPP/C government and its predecessor, APNU+AFC have been besieged by calls from civil society and others for a renegotiation of the iniquitous and inequitable 2016 Production Sharing Agreement (PSA). Both of these governments and their defenders have sought refuge in the Stability of Agreement clause of the agreement which strait-jacketed Guyana. The relevant article says: “Except as may be expressly provided herein, the Government shall not amend, modify, rescind, terminate, declare invalid or unenforceable, require renegotiation of, compel replacement or substitution, or otherwise seek to avoid, alter, or limit this Agreement without the prior written consent of Contractor”.
The defenders of this monstrous agreement fail to recognise or accept that Guyana had no competent oil and gas negotiator at the time of the 2016 PSA and that the Granger administration surrendered itself meekly to ExxonMobil in what one of the then ministers infamously described as a “tweaking” of the agreement.
As limiting as this article is in the 2016 PSA there is an inherent recognition that there may be circumstances in which there could be a renegotiation but that the “prior written consent of (the) Contractor” would have to be obtained. Therefore, for the remainder of this term of the government, President Ali’s number one obligation to each and every citizen of this country should be to elicit a renegotiation of the 2016 PSA to ensure more favourable terms for this country.
For every handout made by the government to whichever segment of the needy population, for every bridge built over a creek, every road resurfaced and fitted with sophisticated cameras, Guyana and its people can gather even more for resources for these and other projects and importantly salt away more for future generations were there to be a renegotiation to bring greater balance to this oil agreement.
Guyana does have leverage to achieve renegotiation. It isn’t required to approve platform after platform in the Atlantic without ensuring that its take improves. Aside from Liza-1 and Liza-2, approvals were supinely accorded by the PPP/C government to EEPGL and its partners for Payara and Yellowtail. A fifth application is now before the government for the Uaru development. This platform must not be approved by the government unless ExxonMobil returns to the negotiating table and agrees to a higher royalty and ring-fencing of expenses among other improvements to the 2016 deal.
When the 2016 deal had been signed between the oil partners and the government there had only been one major strike in the Stabroek Block and another one followed shortly after. Since then there have been around 30 more significant finds in the Stabroek Block and without shame, ExxonMobil has pegged the recoverable reserves at 11 billion oil-equivalent barrels. How can any government allow this shameful agreement to prevail over the ever-increasing number of discoveries with the potential for many more? Only a government that is negligent in its stewardship of the people’s interests or one that has been deeply compromised will allow EEPGL and its partners to continue to unjustifiably gorge themselves on this country’s oil wealth. Renegotiate the deal.
