Money invested into first oil project earned back – Exxon official


ExxonMobil’s local affiliate, Esso Exploration and Production Guyana Limited (EEPGL) and its partners Hess and China National Offshore Oil Corporation (CNOOC) have earned back money equivalent to the sum invested in the first project offshore Guyana.

This is according to Alistair Routledge, the President of ExxonMobil Guyana, who engaged reporters on Thursday at his Kingston, Georgetown office.

The development cost for the Liza Phase One project, the first oil-producing area in the Stabroek Block offshore Guyana, was pegged at about US$3.7 billion.

An earlier estimate pegged the project cost at about US$4.4 billion. Oil production started here in December 2019.

And on Thursday, Routledge said the sums equivalent to the initial investment have been recovered.

“It all goes into the same cost bank but we have now recovered the cost that would be equivalent to the original investment for Liza Phase One, especially helped by the price environment last year,” he told reporters.

Because production is now ongoing at Liza Phase One and Phase Two, monies invested are being recovered from both projects.

So, the sum recovered does not necessarily mean that the investment costs from Liza Phase One have been recovered. It means that of all the money recovered thus far, sums equivalent to the original Liza Phase One investment were accumulated.

Cost recovery is a part of the oil contract between the government and the investors.

Oil companies can only recover their costs when they start producing oil. As such, even if a company spends millions of dollars searching for oil but they are unsuccessful, they stand the costs alone.

But if they are successful, as is the case in the Stabroek Block, they are able to recover the money they invested through the cost recovery mechanism.

As per Guyana’s 2016 oil contract, the investors can recover up to 75 per cent of their costs when oil revenues are accumulated.

The remaining 25 per cent of revenues is split equally between the companies and the government; the government also gets an additional two per cent in royalties from total revenues.

Since EEPGL, Hess and CNOOC are co-venturers in the Stabroek prolific block, they share the costs and profits based on their varying stakes in the projects.

Guyana is currently conducting a cost recovery audit of US$9 billion, representing three years of activities (2018 – 2020) by the investors in the Stabroek Block. Through this audit, Guyana will be able to determine if Exxon owes the country any sums.

Meanwhile, Routledge also said that the company will soon release its financial statements for 2022. That will detail the revenues accumulated and show how much was paid to the government and investors.

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