Exxon’s Country Manager Rod Henson during a press conference at the Marriot Hotel on Thursday announced that it is likely to commence oil production by March 2020.
“We are estimating around March 2020 right now. That’s when production will start, and it will be somewhere between 100,000 and 120,000 barrels a day and we continue to try to accelerate on that. I’ll tell you though, we are trying to do this as we safely can,” Henson told local journalists.
After much public pressure, the contract renegotiated between ExxonMobil and the Government of Guyana was released on Thursday. While it contains clauses for the company to put aside millions for local content, it also grants sweeping tax concessions.
The contract was signed in 2016 between the coalition Government, ExxonMobil and its partners in the Stabroek block. In Article 15 of the contract, Exxon is exempted from paying Corporation, Excise or Value Added Tax (VAT) on its earnings from petroleum.
Article 15.4 also provides for the Government itself to pay the company’s income tax. To facilitate this, the oil company has to submit tax returns to the Government.
That’s not all. Article 32 stipulates that Government cannot modify the contract or increase any fiscal obligation the company has.
This therefore puts a cap on the taxes, royalties, duties, fees or charges outlined in the contract. Government also has to compensate the operator if a change to existing laws causes loss of revenue for the company.
According to Article 32.3, “If at any time after the signing of this agreement there is a change in the laws of Guyana… and such a change has a materially adverse effect on the economic benefits, including those resulting from the fiscal regime provided by this agreement… the Government shall promptly take any and all affirmative actions to restore the lost or impaired economic benefits to contractor, so that contractor receives the same economic benefit under the agreement that it would have received prior to the change in law or its interpretation, application or implementation.”
The contract goes on to say: “The foregoing obligation shall include the obligation to resolve promptly, by whatever means may be necessary, any conflict or anomaly between this agreement and any such new or amended legislation, including by way of exemption, legislation, decree and/or authoritative acts.”
But there are provisions for Exxon to fulfil its corporate social responsibility. This includes a fund for social and environmental projects. Exxon has to contribute US$300,000 per year to this fund. The sums roll over, and the company, together with Government, will determine which projects to fund.
The contract sets aside another US$300,000 per year to ensure Guyanese personnel are trained at local or overseas universities and conferences. There are also provisions for a continuous review of local content.
The agreement will see Guyana receiving a 50/50 profit and a two per cent royalty. Oil from just the Liza Phase One could be over US$1.5B after five years and over $7B over the life of the project.