Natural Resources Minister confirms Guyana will be paid royalties, profit % from first barrel

Responding to concerns about when profits will actually be split between ExxonMobil and Guyana, Natural Resources Minister Raphael Trotman has posited that Guyana will be paid its two per cent royalty and its percentage share of the profits from the time Exxon first starts extracting oil.
“From the first barrel, Guyana will receive two per cent royalty. It will also receive a percentage of the profits. So 75 per cent of the profits will go towards (Exxon’s) cost recovery. So far, we’re looking at a G$5 billion investment,” he explained.

Esso Exploration and Production Guyana Limited (Exxon’s subsidiary) is the operator of the 6.6 million-acre Stabroek Block, and holder of a 45 per cent interest therein.
Hess Guyana Exploration Ltd. holds a 30 per cent interest therein, and CNOOC Nexen Petroleum Guyana Limited holds a 25 per cent interest as well.
The minister noted that the remaining 25 per cent of the profits would be split between Guyana, ExxonMobil and its partners.
At present, the world market price for oil stands at US$50. The resource is notoriously volatile, however, and is vulnerable to the ripples caused by global politics and economics.
“So 25 per cent will be shared between Government and the partners,” Minister Trotman stated. “So we’ve worked that out, and at about US$50 a barrel (of oil), Guyana is going to get a lot of money from day one.”
The Government has justified the two per cent royalty by contrasting it with the 50/50 share of the profits; an arrangement that the Government has said is a reasonable one, arrived at through the advice of experts. Some had opined that a revenue-sharing arrangement would be a better option than a profit-sharing one.
In May 2015, the oil giant ExxonMobil confirmed significant discovery of oil at its Liza 1 exploration well, where more than 295 feet of high-quality oil-bearing sandstone reservoirs were encountered.
In late June 2016, Exxon’s drilling results at Liza 2 revealed more than 58 metres of oil-bearing sandstone reservoirs in Upper Cretaceous formations.
Drilling results confirmed recoverable resources to be between 800 million and 1.4 billion barrels of oil equivalent. Data from the Liza 2 well test is being assessed.
The company later announced that it made its third significant discovery in its drilling explorations offshore Guyana.
Its partner, Hess Corporation, had noted that the Liza 3 exploratory well’s net value could be US$6.2 billion, based on calculations from the Bank of Montreal (BMO) Capital Markets.
Exxon’s oil find in Guyana has attracted international attention.
In addition, assistance is being provided by the International Monetary Fund (IMF) to boost Guyana’s administrative capacity to handle the expected inflow of revenue.