Guyana is set to receive a larger share of the oil produced from the Stabroek Block after ExxonMobil and its co-venturers recovered about US$55 billion in investment and a substantial amount of operating costs.
To understand why, it is important to understand how cost recovery works.
ExxonMobil, Hess (owned by Chevron) and CNOOC spend billions of dollars exploring for oil and gas, developing projects and operating them. Under the Stabroek Block production sharing agreement, the companies can recover these expenses from the oil they produce.
Up to 75% of production can be allocated to them for this purpose. This is known as cost oil.
What remains is profit oil, which is divided equally between Guyana and the co-venturers.
Basically, if 100 barrels are produced and the full 75 barrels are needed for cost recovery, 25 barrels remain as profit oil. Guyana receives half, or 12.5 barrels, while the companies receive the other 12.5. Guyana also receives a 2% royalty on production.
But the 75% is a ceiling, not an automatic allocation.
If only 50 barrels are needed to recover the costs that remain, the other 50 become profit oil. Guyana would receive half, or 25 barrels, before accounting for its royalty.
This is why the amount of outstanding costs matters to Guyana.
What has changed?
ExxonMobil Senior Vice President and Chief Financial Officer Neil Hansen said during the company’s second-quarter earnings call that the co-venturers had recovered approximately US$55 billion invested in the Stabroek Block, along with a substantial amount of operating costs.
With that large pool of accumulated expenditure recovered, less oil may now be needed for cost recovery, leaving more as profit oil to be shared with Guyana. So while Guyana has received about 12.5% of production for years, it can now receive a higher share.
But that does not mean Guyana will immediately receive 50% of production.
Cost recovery has not ended.
The four producing developments require continued spending on operations, maintenance, drilling, logistics and other activities. ExxonMobil and its partners are also still developing Uaru, Whiptail and Hammerhead, generating new costs that can be recovered.
More could follow.
ExxonMobil is seeking approval for Longtail, its eighth proposed Stabroek Block development. If approved, another round of development spending would enter the cost recovery system.
The difference is that these costs are now being recovered against a much larger production base.
The Stabroek Block is producing more than 900,000 barrels per day following the startup of Yellowtail, with production expected to grow further as additional projects come online.
Oil prices also play a role. Higher prices increase the value of the barrels allocated to cost recovery, allowing expenditure to be recovered more quickly. Exxon said the US$55 billion cost recovery milestone was reached about two years earlier than expected.
New developments such as Longtail could therefore increase the amount going toward cost recovery and reduce Guyana’s share at certain points. But they would not necessarily push cost oil back to the full 75%.
That depends on how quickly new recoverable costs are being added compared with how quickly production can recover them.
Why 2026 will not show the full change
Guyana can expect its share of Stabroek oil to increase, but its overall share for 2026 will not suddenly approach 50%.
The approximately US$55 billion was recovered through the second quarter, around halfway through the year. During the first half, those accumulated costs were still being recovered.
Any increase resulting from the clearing of those costs therefore affects only the period after the cost recovery position changed. It cannot be applied retroactively to oil already produced and allocated earlier in the year.
Guyana’s 2026 share will consequently reflect both periods.
A full year, such as 2027, should provide a clearer picture of the change, although operating expenses and spending on new developments will continue to influence the amount of profit oil available.
The US$55 billion milestone does not mean cost recovery is over. It means a substantial backlog of costs has been cleared. Moving forward, there is no fixed percentage share that can be stated in advance.
In simple terms, Guyana got a smaller share when new recoverable costs were being added faster than they could be recovered. As production grows and costs are recovered faster, more oil can become available for Guyana to benefit.
