The Ministry of Finance has compiled and released its first report on the Government’s management of the oil sector since first oil started in December, revealing among other things that no revenues were earned by the Government for that month.
Rather, the report states that all petroleum from December will go towards profit oil, of which the Government will be entitled to half. Moreover, the amount will be credited into a special account called an under/over lift account. The report also goes on to explain why no oil was lifted.
“During December 2019, no oil was lifted from Liza Destiny since the volume available for lifting, ie 163,673 BBL (Barrels of Oil), was less than the standard cargo size of 1,000,000 BBL.”
“Since the Government did not lift its December 2019 entitlement, this amount is credited to an (over)/under lift account which keeps track of all barrels of crude owed to parties. The combined entitlement of the Contractor10 (CONTR) at the end of December 2019 was 71,040 BBL.”
A total of 427,282 barrels of oil were actually produced, of which 3202 barrels were used for production purposes. Approximately 282,000 barrels of oil were used specifically for the cargo tank ballast.
The first lift of a million barrels of oil from the Stabroek Block, part of Exxon’s share, took place last month. It was expected that Guyana’s first share of crude would be lifted by today. A ship, the Cap Phillipe, arrived last week to ship the crude.
In fact, reports in sections of the media indicate that the oil tanker is set to depart with the one million barrels of crude. According to reports, the offloading will take up to 36 hours, under the watchful eyes of the Guyana National Bureau of Standards (GNBS), after which the tanker is likely to depart today.
Back in December, the Department had announced that Guyana’s first three lifts of one million barrels of oil each will be sold to Shell. Shell was chosen ahead of companies like Exxon, CNNOC, Hess and BP, all of which bid for the oil. But since the oil would be sold on the spot market, there have been questions as to whether Guyana would earn less money for the oil.
This news was immediately criticised by Opposition Leader Bharrat Jagdeo, who has also said that companies participating in this process could be barred from doing business in Guyana should his party be elected next year. In addition, Auditor General Deodat Sharma had said in sections of the media that his department would look into the transaction.
In defending the decision, the Department had said that at the end of the process, Shell had the most competitive yet secure pricing.
The Department had also claimed that Shell’s global trading reach, Latin American interests and willingness to share refinery info were factors in the decision. In addition, they had reported that Shell was ready to support the Energy Department in operating the cargoes.
“The decision was based on the following criteria: A competitive pricing that limits the Government’s exposure to market uncertainty, the size, scale and global reach of the Shell trading operations’, the company’s high level of integration between Upstream, Trading and Downstream,” the Department had said.
The Department also cited Shell’s “strong foothold in the Latin American markets and the size and scale of their shipping and storage operations in the region, allowing for multiple options on the Liza crude commercialisation. The range of new grades Shell has recently introduced into the market and their willingness to share critical refinery information with the DE which Guyana needs in order to understand Liza crude behaviour.”
