Exxon made US$56 billion last year. So, what?

Must Read

OilNOW is an online-based Information and Resource Centre

ExxonMobil made a US$55.7 billion profit in 2022. That is a huge number. So, when Guyanese media outlets report on the oil major’s earnings, many locals are quick to assume that these earnings are Esso Exploration and Production Guyana Limited (EEPGL)’s earnings, instead of ExxonMobil – the multinational oil and gas corporation.    

This sort of thing happens when the earnings of many of the leading international oil companies (IOC) and service companies operating in Guyana’s oil sector are reported.

What these reports often do not convey clearly is context. The most glaring example of this came in the form of a recent full-page feature in a Guyanese newspaper, headlined ‘Exxon 55, Guyana 1’. The insinuation here is that Exxon’s global US$55.7 billion profit – earned from operations on almost every continent on the planet – is comparable to the US$1.1 billion in profit oil revenues the Guyana government received from production at a single offshore oilfield.

The Stabroek Block Production Sharing Agreement (PSA) is configured to split profit oil 50/50 between Guyana and the contractor. Because the contractor is three companies – ExxonMobil (45%), Hess (30%) and CNOOC (25%) – the contractor’s share of profit oil is further split three ways. This means Guyana will always be on the receiving end of more profit oil than each Stabroek Block co-venturer, even Exxon.

The misconception that the IOCs profit more than Guyana occurs when reports are made that the companies received more money from crude exports than Guyana in any given year, sans context. For instance, the crude oil exported in 2022 is valued at US$9.98 billion, according to the Ministry of Finance. The US$1.1 billion received by Guyana, revised upward to include royalties and payments for two December lifts expected to be received in January, becomes US$1.42 billion (or 14.2% of the value of 2022 crude exports).

While the other US$8.56 billion goes to the IOCs, most of that value accounts for cost oil, necessary so they can recover the billions they invest into exploring and developing the fields offshore Guyana. Between the first four development projects the Stabroek Block co-venturers have taken final investment decisions (FID) on, the investments total nearly US$30 billion. This is in addition to billions in exploration investments required to spud the scores of wells drilled by ExxonMobil to unlock Guyana’s 11 billion oil-equivalent barrels. The 75% cost recovery ceiling is a mechanism in the PSA which allows the companies to quickly recover the funds they invested. This swift recovery of costs is an incentive that encourages IOCs to invest.

There will come a time, after the co-venturers have substantially recovered their costs, that the lifts to Guyana and the combined lifts to the consortium are closer to equal. In the meantime, Guyana invests nothing and bears none of the risk. So, it recovers nothing.

In conclusion, misconceptions about what a multinational corporations’ earnings really mean can hurt the productive relationships the Guyana government has fostered with multinational corporations operating in this sector and send the wrong message about the petroleum sector’s impact on Guyana’s development. 

About Energy Insights

From the people who bring you day-to-day coverage through OilNOW – the Caribbean’s premier oil, gas and energy information service – the Energy Insights column offers perspectives and analyses on the evolving energy sector in the South American/Caribbean region, and further afield.


Partnered Events

Latest News

Exxon conducting drilling operations at Haimara-3

ExxonMobil is continuing exploration drilling at the Haimara-3 well site in the Stabroek Block offshore Guyana. The drilling, conducted...

More Articles Like This