Guyana expects 309 million-barrel cargoes of crude oil to be produced and exported from the Stabroek Block in 2026.
But when a tanker arrives to collect roughly one million barrels from one of the floating production vessels offshore, how is it determined whether that cargo belongs to Guyana, ExxonMobil, Hess (Chevron) or CNOOC?
It is not simply a case of ExxonMobil, the operator of the Stabroek Block, deciding who gets the next cargo. The parties have entitlements to portions of the oil produced, and those entitlements are translated into a schedule setting out who is due to lift particular cargoes.
Under the Stabroek Block production sharing agreement (PSA), crude is divided according to rules governing cost recovery and profit sharing.
The contractor group can recover eligible petroleum costs from a portion of production. The remaining profit oil is divided equally between the government and contractors.
Guyana also receives a 2% royalty on production, but this is a separate revenue stream and should not be confused with the physical cargoes Guyana receives as its oil entitlement.
The parties, including Guyana, have a Crude Lifting Agreement which establishes a mechanism for allocating cargoes based on their entitlements, taking the PSA’s cost recovery rules into account.
But those entitlements do not always divide neatly into million-barrel cargoes.
For example, a party might be entitled to 700,000 barrels when a roughly one-million-barrel cargo is ready to be lifted. A party may therefore temporarily lift more or less crude than its precise entitlement, with the difference subsequently reconciled through future cargoes.
In simple terms, lifting more oil at one point does not mean receiving extra oil permanently.
So who gets cargo No. 10?
The parties know in advance.
Guyana’s 2023 Extractive Industries Transparency Initiative (GYEITI) report states that the parties lift according to their entitlement interests and that a provisional schedule is circulated two months in advance before subsequently being finalized.
Guyana’s turn can change as its entitlement changes
This is particularly relevant now.
ExxonMobil has indicated that the Stabroek Block co-venturers have recovered approximately US$55 billion in investments and operating expenses, representing a substantial portion of the costs incurred in developing the block.
With fewer barrels required to recover those costs, more production becomes available as profit oil, which is divided equally between Guyana and the contractors. Guyana is consequently entitled to a larger share of overall production.
That change also has to be reflected in the lifting arrangements. As the parties’ volume entitlements change, the schedule determining who receives upcoming cargoes must be adjusted accordingly. In practical terms, Guyana becoming entitled to more barrels means its name should appear more frequently in the sequence of million-barrel lifts.
Allocation and sale are two different things
There is also an important distinction between determining whose cargo it is and determining who buys it.
Once a cargo is allocated to Guyana under the lifting schedule, the government can market that crude to a buyer. GYEITI has described a process in which the approved lifting schedule is provided to the government’s crude marketer, which markets the cargo and receives bids for the crude.
That means ExxonMobil or an affiliate can potentially buy a Guyana cargo without that cargo having originally been ExxonMobil’s entitlement.
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This happened with Guyana’s first lift from the Liza Unity FPSO in April 2022. The government was entitled to the approximately one-million-barrel cargo, but ExxonMobil Sales and Supply LLC won a competitive bidding process to purchase it.
So there are really two questions: Which party is entitled to the next cargo? That is governed by production, contractual entitlements and the lifting schedule.
And who ultimately buys it? For Guyana’s share, that depends on the government’s crude marketing arrangements.
As hundreds of million-barrel cargoes leave Guyana’s offshore fields each year, counting tankers tells you how much oil is leaving the Stabroek Block. Understanding the lifting arrangements tells you whose oil is actually aboard them.
