Dear Editor,
Article 11 of 2016 Production Sharing Agreement (PSA) states “cost oil is limited in any month to an amount which equals 75% of the total production from the contract area for such month”. Cost oil includes all recoverable contract costs incurred by the contractor. With time or production milestones, recoverable cost percentage (cost oil %) for each well project should be ‘sliding downwards’ but an exclusion of this clause may be an oversight by the representatives of the Guyanese people hence a ‘colossal’ error. For example, it appears that Liza Destiny oil well(s) will incur a fixed cost oil percentage (75%) throughout its production life.
Article 15.6 (Taxation and Royalty) of the 2016 Production Sharing Agreement states “The contractor shall pay 2% of all petroleum produced and sold, less the quantities of petroleum used for fuel or transportation in petroleum operations”. Guyana’s profit oil may be less than 14.5% of gross production. Assume no fuel (crude oil) taken from gross production for petroleum operations.
Royalty = 0.02 of gross production barrels (bbl)
bbl remaining after royalty taken from gross production = 0.98 of gross production
bbl remaining after cost oil = 0.98 – (0.98X0.75) = 0.245 of gross production
Profit oil bbl = 0.245X0.5 = 0.1225 of gross production
Guyana’s Profit oil bbl = 0.1225 + 0.02 = 0.1425 of gross production which is 14.25% of gross production.
Sincerely,
Gary Sampson
