Wednesday, December 7, 2022

Stabroek Block royalties not part of cost oil – Guyana tax boss

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OilNOW
OilNOW is an online-based Information and Resource Centre

Commissioner-General of the Guyana Revenue Authority (GRA), Godfrey Statia said on Saturday that royalties paid by the Stabroek Block consortium are not allowable in the calculation of cost oil.

The tax boss explained this in response to “misinformation” in the local press about the petroleum tax regime and the petroleum cost recovery regime in the Stabroek Block production sharing agreement (PSA). These provisions govern four approved and sanctioned projects that together, will carry combined production capacity of 830,000 barrels of oil per day by 2025.

Statia noted that while the PSA does not explicitly mention royalty as a cost recoverable item, it also does not mention it as a cost not recoverable. In such a case, he explained that the agreement provides for the Minister with responsibility for petroleum to give his approval for such an item to be recovered. Statia said the Minister has not exercised his discretion in this regard.

ExxonMobil Guyana’s Media and Communication Manager, Janelle Persaud, also confirmed to OilNOW last week that the consortium is not cost-recovering royalty.

OilNOW has shown that Guyana profits more than the Stabroek Block consortium under the agreement. Profits are split 50/50 after costs are recovered up to a 75% ceiling, resulting in 12.5% for government and 12.5% for contractor.

It is the royalty that tips the scale in Guyana’s favour. The 2% results in Guyana receiving a 14.5% share. The consortium gets a 10.5% share, to be split three ways between the companies.

Earnings resulting from the development of Guyana’s oil resources has left the Natural Resource Fund (NRF) in a strong position. The Fund, being held by the New York Federal Reserve Bank, had a market value almost three quarters of a billion United States dollars at the end of the first quarter of 2022.

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