Dear Editor,
Please allow me to elaborate on the subject of royalty payments received by our government from the ongoing oil production activities in the Stabroek Block. Last week, I had commented briefly (Stabroek News, 6 March, 2024) on an analysis of Guyana’s royalty receipts that appeared in another newspaper. My intention was to draw attention to the incomplete nature of the analysis in the hope that this might spur a more rational discussion of the subject that could better inform the public. Having since examined the matter in more detail, I now wish to add to my initial comments.
According to information published on the website of the Petroleum Management Programme, Guyana produced 334.04 million barrels of oil between January 2020 and January 2024. During that period, according to the monthly reports of the Natural Resources Fund (NRF), Guyana received royalties to the tune of US$501.76 million and production share equal to US$3.114 billion. Readers are free to use some notional price per barrel of oil in order to get a sense of what these figures actually represent in terms of the 2% royalty and the 50% production share of profit oil owed to Guyana.
I myself have applied the monthly average WTI spot price for each month to the corresponding monthly production amount throughout the period and arrived at estimates of US$520.42 million and US$3.253 billion, respectively, for the royalties and production share that our country should have received. I consider these amounts close enough to the actual amounts reported by the NRF, especially when one considers that royalty and production share accrue constantly and, therefore, at any point in time there are tens of millions of dollars in receipts outstanding. It should also be noted that oil prices vary. For instance, Brent Crude prices are generally higher than WTI prices and first purchase prices generally lower than both of these.
I am not suggesting that everything is fine and that we should not constantly examine and query how our nation’s wealth is accounted for. It is well known that industry operators will always have an advantage over regulators arising out of their experience and control of operations, and are more likely than not to err in favour of their best interests when the opportunity occurs. In the case of ExxonMobil and Guyana, this phenomenon is probably at its extreme and we have much work to do in closing the avenues available to facilitate exploitation. However, the suggestion that Guyana is only receiving 0.5% in royalty payments is nothing short of a load of nonsense as is any extrapolation arising out of that suggestion.
In closing, I have noted an article published in your newspaper (Stabroek News, 9 March, 2024) and written by one of your regular contributors, Mr. Christopher Ram, in which he also addresses the subject of royalty payments. From January 2020 to December 2022, Mr. Ram finds a difference worth tens of millions of U.S. dollars between royalty payments received by the NRF and estimates taken from the total revenues reported by the three joint venture partners and the NRF. Ram was careful to point out the possibility that different accounting methodologies (accrual vs cash basis) might help to explain this discrepancy. In this regard, it is useful to note that a royalty payment of US$57.6 million with respect to the preceding quarter was received by the NRF in January of 2023.
Sincerely,
Dominic Gaskin