Research conducted by the Oil and Gas Governance Network (OGGN), a group of financial analysts, accountants and economists, reveals that Guyana has sold its oil at US$29B below market value.
The group was started in 2017 with the aim of informing the public about oil matters in Guyana and advocating for transparency and accountability in the Guyana’s emerging oil and gas sector.
According to the entity in a press statement on Monday, “in the last several years, ExxonMobil’s return on capital has been around 16%. A similar rate of return on the Guyana oil fields would give ExxonMobil US$63 billion based on ExxonMobil’s current estimate of 3.2 billion barrels of oil. Instead the Petroleum Agreement signed by Minister Trotman will give ExxonMobil and its partners around US$92 billion!”
It was explained that with Guyana’s population of 775,000, this deal with ExxonMobil and partners will cost every Guyanese citizen – man, woman and child – about $US37,400 each.
“The average salary for a Guyanese worker is US$4,000 per annum. The Guyanese working population will have to work an extra 15 years to replace the money that should have come in from their oil. That money should have gone straight into the bank accounts of the Guyanese people so they could pay for housing, food, water, electricity, education, and other basic necessities” said the OGGN.
“How can any government defend a deal that is so palpably contrary to the national interest?” they questioned.
Moreover, it was stated that in the last three years, ExxonMobil’s rate of return on its capital has hovered around 6 per cent.
According to the OGGN “the Government appears to have been totally unaware of the market for oil and the opportunities for securing a better deal for Guyana. A rate of return of 6.7% for ExxonMobil and its partners on the Guyana assets would have given Guyana a massive additional US$53Bn.”
The OGGN maintains that the sums lost through Guyana’s Petroleum Agreement could have aided in the development of Guyana’s intellectual capital, which it says it critical to the development of any country.
Highlighting that 87 per cent of Guyana’s graduates leave within a few years of graduation, the OGGN said that the Government of Guyana “has meekly handed over to ExxonMobil and its partners trillions of Guyanese dollars that could and should have been spent on creating an enabling environment for the full economic, social and intellectual development of the Guyanese people and the protection of Guyana’s globally significant biodiversity.”
Additionally, they posited that the Government of Guyana’s Petroleum Agreement is based on an oil price of US$50, noting that as the price goes up (Brent Crude is currently US$70) the deal gets worse for the people of Guyana.
“On an IMF graph, which shows how an increase in oil prices affects what an oil-producing country gets, Guyana’s deal is right at the bottom – even below Trinidad and Tobago.”
As such, the entity called for the Petroleum Agreement to be re-negotiated.
“There is no doubt that the Petroleum Agreement should be renegotiated, notwithstanding Minister Trotman’s refusal to accept the obvious from the figures. The Minister’s continued inability to grasp how bad a deal this is for Guyana must surely exclude him from any further activity in the petroleum sector” the OGGN said.
In January of this year ExxonMobil announced its second biggest single oil reservoir find to date in Guyana’s waters, the discovery of 230 feet of high quality oil in its Ranger-1 well within the Stabroek Block.
According to ExxonMobil the well was at the time being drilled by the Stena Carron drillship. Work on the Ranger-1 well had started last November and it was drilled to over 6000 feet before Exxon made its discovery.
The discovery of oil in this well is Exxon’s sixth in local waters since 2015. It is estimated that all these discoveries add up to more than 3.2 billion recoverable oil-equivalent barrels.