Vice President Dr. Bharrat Jagdeo has clarified several misrepresentations about Guyana’s oil and gas industry, particularly those reported on by local newspaper Kaieteur News.
Among the concerns Dr. Jagdeo addressed the government’s monitoring of ExxonMobil’s expenditures. He explained that government monitors the oil company’s spending, but said that this cannot be done in real-time.
“… unless you have co-management, you can’t do that and I maintain that until today.
“There is a provision in the contract where it says that you can get financial statements on a monthly and quarterly basis with the key components of costs,” Jagdeo said.
With this, he said it would be incorrect to report that the government can do real-time monitoring of the company’s costs. Only post-expenditure monitoring can be done.
What the government has been doing is monitoring the post-expenditure financial statements.
A local consortium has also been tasked with conducting the cost recovery audit of US$9 billion, representing three years of activities (2018 – 2020) by ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Ltd (EEPGL) in the Stabroek Block, Liza Phase 1 project.
Importantly, the Vice President explained that even when the government requests those financial statements intermittently, audits can only be conducted once annually.
The clarification offered by the Vice President on this matter were among several matters he addressed during a programme with Kaieteur News publisher Glenn Lall on Tuesday.
He also set the record straight on the company’s asset base, thereby illustrating EEPGL’s ability to respond to adverse events such as an oil spill.
The Vice President highlighted that EEPGL has about GY$1.2 trillion (or about US$6 billion) in immovable assets. Lall believed that the company’s asset base was just about $55 million.
With this, he explained that if the US$600 million oil spill insurance proves inadequate and the company refuses to meet their obligations of cleaning up such an occurrence, then the Environmental Protection Agency (EPA) can dispose of those costly assets.
Meanwhile, Dr. Jagdeo also underscored that Guyana does not have any stake in EEPGL as believed. This company, he reminded Lall, is the local subsidiary of ExxonMobil. Beyond this, EEPGL and its co-venturers Hess and CNOOC are the co-venturers in the prolific Stabroek Block
What Guyana benefits from is a profit sharing agreement that sees the country getting 14.5 per cent of the profits generated from activity offshore in the Stabroek Block.
Under the production sharing agreement (PSA) with the ExxonMobil-led consortium, EEPGL can recover no more than 75 per cent of its costs.
Of the remaining 25 per cent – the sum remaining after expenses are deducted – EEPGL and the government splits the profit half and half. That means, the company gets 12.5 per cent of the remaining revenue and the government gets 12.5 per cent.
In addition to that 12.5 per cent profit, however, the government also gets a two per cent royalty – or extra payment from the oil companies.
It was previously explained that this two per cent royalty is two per cent of the total revenue (the 100 per cent) and not two per cent of the profit share. That means that ultimately, Guyana gets more money- in fact, it amounts to 14.5 per cent of the total revenue.
The government’s ambitious gas-to-energy project at Wales, West Bank Demerara (WBD), was another matter the Vice President addressed.
Lall posited that it is possible to produce electricity at the low rate of three cents per kilowatt hour if the government establishes a larger scale renewable energy project. Lall said this has been achieved in other parts of the world.
But Dr. Jagdeo said that is not feasible, pointing out that many countries are now searching for more supplies of oil and gas to offset the resources lost from sanctions imposed on Russia.
He also explained that natural gas is being used as a transition fuel to wean Guyana off of its dependency on fossil fuels (like heavy diesel that is currently used) and use cleaner sources of energy like wind, solar and hydro power.
All in all, the Vice President believes that the government has been striving to manage the sector prudently in the two years it has been in office. He, however, noted that much more work is needed.