ExxonMobil, Guyana in standoff over contract terms

Market: Crude oil
20/10/23

Details of a disagreement between ExxonMobil and Guyana over terms for recently auctioned offshore acreage came to light this week, as the growing oil producing nation tries to keep a greater share of its natural resource wealth.

The company is among bidders for several blocks in the country's first competitive auction that closed on 12 September and which carried terms different from those ExxonMobil signed in its original 2016 contracts.

ExxonMobil will not sign the revised production sharing agreement "in its current form" because of concerns about the timeframe for the work programme and the period stipulated for the relinquishment of acreage, ExxonMobil Guyana's president Alistair Routledge said this week.

"There are a lot of approvals that are required under the new production sharing agreement that I do not think the natural resources ministry is set up to process, review and to exercise," Routledge said.

While Guyana is willing to make "minor changes," it will not alter the core terms of the new agreements, Guyana's vice-president Bharrat Jagdeo said yesterday.

"We are not going to weaken them to suit ExxonMobil," he said. "If it does not want to sign them, that is fine. But Guyana must get a fair share from its resources."

ExxonMobil leads a consortium that started crude production in 2019 from the deepwater Stabroek block. Its license was granted through a non-competitive process following direct negotiations between the government and companies.

The new production sharing terms will see winning bidders paying a 10pc royalty, against 2pc being paid by ExxonMobil under its 2016 production sharing agreement.

The current 75pc cost-recovery ceiling is being lowered to 65pc, while profit sharing after cost recovery remains evenly split between the contractor and the government.

"These new terms will double Guyana's share from 14.5pc to 27.5pc, plus the newly introduced 10pc corporate tax," the government said.

The government offered 11 shallow-water and three deepwater blocks in the auction and received bids on eight of them from France's TotalEnergies, Qatar Energy and Malaysia's Petronas, among others.

Negotiations with the bidders will end 27 October, with the awarding of contracts scheduled for 1 November, the government said.

Guyana produced 371,360 b/d of crude in August, a 1.8pc increase from the corresponding month last year, according to the government's petroleum management program.

Total Guyana output could reach 1.2mn b/d by the second quarter of 2027 with more Stabroek projects, according to ExxonMobil.

By Canute James

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21/11/24

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21/11/24

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21/11/24

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20/11/24

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