Alistair Routledge, President of ExxonMobil Guyana, has defended the contentious 2016 Production Sharing Agreement (PSA) that the company inked with Guyana for the profitable Stabroek Block.
Raphael Trotman, the former Minister of Natural Resources who signed the 2016 agreement with Exxon, was a member of the APNU + AFC Coalition government from 2015 to 2020. Both residents and industry experts have said that Exxon and its partners, Hess Corporation, Chevron, and China’s CNOOC, stand to gain more from the transaction than the nation does. Tom Mitro, a senior scholar at Columbia University’s sustainable investment center, and other analysts contend in a recent Financial Times piece that the 2016 PSA inked with Guyana is excessively advantageous to Exxon.
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In response, Routledge stood behind the contract, claiming that the conditions were favorable for a deepwater frontier development that had received little attention until the significant recent finds. When Shell left the group in 2014, Exxon sent out 35 letters looking for partners, and only two businesses responded: Hess and Cnooc, he claimed. According to Routledge, during the course of the project’s decades-long operation, returns to Guyana might surpass US$10 billion. The deal would not be renegotiated as “contract sanctity is super important for investors”, he added.
Routledge, “Everybody can cherry pick certain things but at the end of the day, it’s a collective economic return … for an economy [whose current] national budget is only around US$3.5 billion -US$4 billion. It is quite transformational.”
The Stabroek Block in Guyana, which spans 6.6 million acres and has 11 billion proved barrels of oil, is highly profitable. Exxon’s Guyana operates the block and owns a 45 percent stake in it. Guyana Exploration Hess Ltd. Currently, 25% of the stake is held by CNOOC Petroleum Guyana Limited, while 30% is held by Chevron. Guyana receives an industry-low 2 percent royalty under the 2016 agreement. Currently, Guyana and ExxonMobil split earnings after the latter takes a 75% cut for the expenses related to developing the Stabroek Block’s resources.
Due to this arrangement—which lacks ring-fencing—Guyana is required to pay for projects for which production has not yet begun. Exxon adds monthly invoices from future producing ventures to the list of expenditures it must recover.
Following the deduction of 75% for the purpose of repaying the oil firm, Guyana divides the remaining 25% equally between Exxon and itself as profits. This represents 12.5% of the operations’ earnings. Additionally, Guyana has committed to paying ExxonMobil’s portion of Corporation and Income Tax under the terms of the inked agreement. As a result, Guyana would have to give up billions of US dollars annually. Furthermore, the US-based corporation receives documents to this effect, which exempts it from paying taxes on its offshore revenues in its home nation.
While Guyana earned just US$1.4 billion in revenues and royalties from the Stabroek Block last year, the block generated a considerable US$9.8 billion, and Exxon needed US$7.4 billion to recoup its expenditures. Additionally, according to the government’s Half-Year Report, Guyana can see a decrease in industry earnings this year as a result of decreased demand and falling oil prices on the international market. The estimated sum of petroleum deposits for the year is currently $1,629.3 million, which is US$2.4 million less than what was first predicted.
Additionally, Routledge informed the Financial Times, “It is a jewel in ExxonMobil’s crown. It’s a significant resource. It fits very well with the execution capability of ExxonMobil.”
Routledge stressed when asked what he thought of Chevron’s US$53 billion acquisition of Hess, “Clearly what’s attractive to Chevron is that ExxonMobil is operating at a very high level… From first discovery in 2015 to first oil in 2019. I mean, [it’s] just unheard of really to develop a new resource in a brand-new basin with no existing infrastructure in that short a timeframe.”
Furthermore, it was reported that Wall Street experts praised the Exxon-led Guyana venture as “the best oil deal in modern history.”
In an interview with British Broadcasting Corporation (BBC), President Irfaan Ali of Guyana reaffirmed the administration’s stance against renegotiating the unfair Exxon agreement, but he also acknowledged that the pact benefited the oil company more than this nation. President Ali stated, “Well, I would say definitely, we did not have the best of deals, Exxon has a good deal signed by the last government.” President Ali went on to emphasize that the contract’s validity is “very important” to his government. He added, “And we can’t go back on that.” To this end, Long asked, “So there will be no renegotiating of the contract?”
“We cannot go back and renegotiate,” President Ali answered. He continued by saying that even if the Guyana government is unable to renegotiate the agreement, they have started a number of projects to increase the nation’s advantages.
Darren Woods, the CEO of ExxonMobil Corporation, talked about Guyana as “the story of success” earlier this year during a recent discussion at the annual S&P Global CERAWeek conference, held in Houston, Texas.
Woods took great pride in highlighting the company’s quick progress across the nation. Daniel Yergin, the vice chairman of S&P Global and the CEO of Exxon, was speaking about potential investment ideas in the oil industry when Yergin said, “So let me ask you, mega projects, you did mention Guyana. I mean that’s pretty incredible how fast that developed.”
In response, Woods said, “Yes it is…Yeah I mean if you look at that it’s really a story of success, and I would also tell you that we are very focus as we grow that production.”
In reference to Exxon’s achievements in Guyana, Woods said that the business broke the industry record by going from its initial discovery to its first oil in less than five years.
The Exxon CEO noted, “We brought that like from discovery to first production in five years which is not industry record is pretty close to it. When you think about what typically the timeframe (is), (it) typically (takes) the industry about 10 years.”
He further added, “If you then look at what we have delivered since that timeframe, we are bringing in those ships [Floating production storage and offloading vessels] and that production ahead of schedule, we’ve beaten schedule for the two ships [Liza Destiny and Liza Unity] that we’ve got and the third one [Prosperity] that we are working on, that is expect to beat schedule.”
Woods boasted that ExxonMobil Guyana could operate a production facility, “at a higher level than we have anticipated when we made those investments and staying focused,” mentioning that the business is also concentrated on “helping with reducing emissions.”
The CEO of Exxon also disclosed that the business is collaborating with the Government of Guyana (GoG) on the US$2 billion Wales gas-to-energy project in order to bring gas ashore. He remarked, “We got a project that we are working on with the Government of Guyana to bring gas onshore to back out some of their higher emission intensity power to substitute that with gas. So we lower emissions and get better more reliable power to the people that’s a real win-win situation.”
