Total government oil take could hit US$100BILLION

DPI, Guyana, Wednesday, July 11, 2018

If only the eight discoveries by ExxonMobil are sanctioned, Guyana’s total take from oil production could reach as much as US$100Billion which is equivalent to GYD$20,821,000,000,000.00.

This was one of many very large numbers included in a presentation yesterday evening at Duke Lodge by Sonya Boodhoo, Senior Analyst at Rystad Energy, hosted by the Private Sector Commission (PSC) of Guyana.

Rystad Energy is an independent energy consulting services and business intelligence data firm which offers strategic advisory and research products oil companies, investors, investment banks and governments.

The topic was “Guyana’s revenue from oil production and how this is related to international standards for revenue sharing” and among her observations was that the contract with ExxonMobil was in line with others signed by what is deemed frontier countries (without proven reserves and some amount of other risks) which average 45-70 percent in government take. In the case of Guyana, the ExxonMobil Profit Sharing Agreement has a government take of 59 percent, said Boodhoo.

When ExxonMobil made its first discovery in May 2015, the Guyana basin was not considered de-risked geologically and the threats by neighbour Venezuela over Guyana’s Exclusive Economic Zone added another layer of uncertainty. Boodhoo added that the favourable terms have been successful in attracting ExxonMobil and other oil companies into the region. She also gave examples of countries that had changed contract terms only to find a lukewarm response to subsequent auctions from companies who were not sure the contracts were a reliable basis on which to plan major investments.

As for Guyana, Boodhoo pointed out that since 2015 Guyana leads the world in offshore oil discoveries and that ExxonMobil’s 80 percent success rate was extraordinary in an industry with an average of 35 percent. She gave a detailed breakdown of what her firm estimates the size of each of ExxonMobil’s discoveries are and their costs of production. This range from GYD$6,454.51 (US$31) to GYD$10,410.50 (US$50) per barrel with the exception of the smallest Turbot. She expects ExxonMobil to spend around US$15Billion which is equivalent to GYD$3,123,000,000.00 to develop the wells with two more Floating Platform Storage and Offloading vessels to be constructed with even larger capacities than the 120,000 barrels per day Liza Destiny.

Rystad sees production at the Liza 1 Well commencing in 2020 with a three-year build-up and plateau production of 110 barrels per day being achieved by 2023. However, if all eight discoveries are sanctioned production would reach 700,000 barrels per day by 2030.

Boodhoo, stated that Rystad estimates the result would be total government take of some GYD $20.3 Trillion (US $97Billion) with the oil price averaging GYD $14.7 Trillion (US$70Billion). Even at a low of GYD$10,410.50, take would be GYD $10.7Trillion (US$51Billion). This does not take into account further discoveries by ExxonMobil and other companies now exploring the basin.