Jagdeo sets the record straight on Guyana’s oil revenue
General Secretary of the People’s Progressive Party, Dr Bharrat Jagdeo, has once again clarified several miscalculations swirling in the public domain, concerning Guyana’s oil revenues in keeping with its Product Sharing Agreement (PSA).
He was at the time speaking at his weekly press conference at Freedom House on Thursday.
The GS referred to an article published in a local newspaper, which contends that Guyana is only receiving a 0.5 per cent royalty, instead of the contractual 2 per cent, from ExxonMobil Guyana Limited (EMGL) operations.
In this article, it was argued that the oil giant is paying Guyana’s royalty from its profits, thereby shortening the revenues from the royalty.
For context, royalty is the payment a company makes to the government for the right to extract resources from its territory.
According to the PSA signed between Guyana and ExxonMobil, the country is entitled to two per cent of all petroleum produced and sold as royalty, in addition to 50 per cent of all profits.
There is also a cost recovery ceiling in place, which limits how much companies can deduct from their expenses before profit sharing. This limit is set at 75 per cent of total revenue from the sale of petroleum each month.
The article claims that 75 per cent of the monthly earnings are deducted, leaving the remaining 25 per cent, of which Guyana receives 50 per cent (equivalent to 12.5 per cent of total revenue earned), and the country’s royalties are also paid from Exxon’s share of the profit.
However, Dr Jagdeo made it clear that this is not the case.
Dr Jagdeo described this analysis as ‘rudimentary’, and detailed a numerical breakdown of Guyana’s royalty earnings.
“In Guyana’s case, royalty is calculated on the basis of total production and total sales,” he said.
Dr Jagdeo continued, “Every month, they have to confirm what the average weighted price would be. At the end of the year, when this is aggregated, there should be a total sales figure. We get two per cent of that total sale, not two per cent of the profit. Two per cent of gross is calculated on the basis of weighted average, for monthly sales, and then on a quarterly basis the royalty is paid. So, at the end of the year, if you add up total sales in the accounts, you should see a gross number and royalty is two per cent of that gross number.”
He further clarified, saying, “For example, in 2021, if you look at the total royalty that we received, it was US$59.7 million”.
He said that Exxon’s share was US$26.9 million because they have 45 per cent of the block.
“…So they are entitled to 45 per cent of the crude. When we multiply that by the exchange rate of 208.5, we had $5.6 billion in royalty collection. Exxon, in their financial statement for the Guyana operation, showed $5.8 billion, so what’s the difference? They had $200 million higher than us. The difference is that they used a different exchange rate in converting the US dollar to Guyana dollars. It’s the same amount,” he explained.
According to Dr Jagdeo, this means that the country earns its 12.5 per cent profit share, in addition to the two per cent royalty. Based on this logic, the country receives 14.5 per cent in royalty and profit oil.
“Every year, we end up getting, of the 25 per cent set aside for-profit oil, we end up with 14.5 per cent, and the contractor with 10.5 per cent of gross,” the GS added.