The government of Guyana in the coming days will lift its first share of oil from the Liza Phase 1 Development located 120 miles offshore at the 6.6 million acres Stabroek Block.
Shell Western Supply and Trading Limited has been engaged by the government to lift the country’s first 3 oil cargoes.
Speaking on a live radio programme in Georgetown on Thursday, Director of the Department of Energy (DE), Dr. Mark Bynoe, said focusing on the sum total of benefits coming to the South American country instead of focusing exclusively on one element will help Guyanese to better understand how the emerging oil and gas sector can transform the country.
Dr. Bynoe was at the time responding to questions about the nature of the deal Guyana has with ExxonMobil and its co-venturers Hess and CNOOC which some have criticized saying the country could have secured more favourable terms.
“Let’s be fair and let’s be pretty candid. The issue here has been – Guyana was a country in which there was no successful exploration,” he pointed out, stating that for several decades attempts to strike oil were futile although more than 40 wells were drilled.
It is in this context, he said, granting tax breaks and “sweetening the pot” in order to attract investors to the greenfield basin were necessary measures any government would have taken under the circumstances.
“Now that Exxon has become successful, it seems we are bringing to the fore, these various issues,” he stated, referring to criticisms of the Production Sharing Agreement (PSA).
Under the PSA a maximum of 75% will be taken from production as part of cost recovery. The remaining 25% profit oil will be split 50/50 between government and the Stabroek Block co-venturers. Government will also receive 2% royalty.
“So that is 12.5% plus 2% which is 14.5% at a minimum, from day one,” he said, stating that there are few investments that allow for a starting point of 14.5% rate of return, from day one. “Government took absolutely no risk in terms of this particular venture,” he pointed out.
The DE Director said the economy of Guyana is also receiving withholding taxes and foreign direct investments, in addition to the more than 1700 Guyanese working in the sector, 600 service suppliers and over 70 joint ventures.
He reminded that the profit oil will significantly increase after the cost recovery period which should take around 5 years at minimum.
“I am sitting here, and I can say definitively that Guyana’s first million-barrel entitlement will be shipped in February,” he said, adding, “Now, you can call that what you wish but that’s a reality. Facts are some stubborn things to deal with.”
ExxonMobil began producing oil at the Liza Phase 1 Development in December and the first oil cargo was lifted in January. The company has so far found more than 8 billion barrels of oil equivalent resources and is already moving to develop the second phase of production at the Liza field. A third development at Payara is awaiting approval from authorities.
The company has said it remains on track to produce upwards of 750,000 barrels of oil per day by 2025 and experts in the industry see Guyana’s total production surpassing 1 million barrels per day by the end of the decade.
