Published: July 15, 2018
Energy research company Rystad told a private sector forum last Tuesday that Guyana could reap about US$20 billion in profits from the eight oil discoveries by ExxonMobil.
The Oslo, Norway-headquartered Rystad Energy, which has produced a report on Guyana’s fiscal framework for oil, is hoping to gain new clients here, including the government.
“We hope to expose the wider market here in Guyana to our business, what we do , how we do it and hopefully explore different possibilities of helping not only the Guyanese government and the private sector but industry players going forward,” Schreiner Parker, who is Vice President responsible for Latin America and the Caribbean at Rystad Energy, told this newspaper.
“We actually positioned this as a marketing event for our company and are aided by the Private Sector Commission (PSC) in hosting this event…,” Senior Analyst Sonya Boodoo added.
They were here on the invitation of the PSC, having released their study on Guyana’s fiscal regime from oil proceeds earlier this year. On Tuesday evening, they held a public meeting at Duke Lodge, Georgetown, where they discussed their company’s study.
Last month, Stabroek News reported on a release from the company, which said that this country stands to earn billions annually that could push its revenue from oil way beyond current expectations. The release was completed and published before Exxon’s eighth discovery, which has created the potential for additional resource development in the southeast area of the Stabroek Block.
In the current fiscal regime, the government collects its share through a 2% royalty and a 50% split of profit oil. Rystad Energy estimates that this will give the government 60% of the profit from the various projects [government take], while the remaining 40% will go to ExxonMobil and its partners.
Tuesday’s presentation gave snippets of the study, which factored in Exxon’s eighth find and used variables, such as a flat rate of US$70 per barrel of oil equivalent and that all eight would be developed commercially. It was with those variables that Boodoo gave an estimate of US$20 billion.
She said that in the first five years of production there won’t be much money to split but pointed out that by 2025, Guyana “will be generating around US$2.5 billion.”
Asked why the company conducted its analysis using a figure per barrel US$20 higher than Exxon, it was explained that it factored in current trends and also found an average of US$90 per barrel as a high and a low of US$50.
“When those budgets [US$50] were done was in a time of lower oil prices. We have looked at US$50, US$70 and US$90, we have taken its variables but we have used US$70 as a base. It can be adjusted… Brent Oil is trading right now in the 70s and we kinda think that US$70 is kind of a today oil price,” Parker explained.
Rystad’s analysis says that despite the criticism, “Guyana’s fiscal regime is favourable to oil companies when compared to mature oil and gas development countries but is in line when compared with other countries of equivalent maturity.”
“We wanted to compare apples to apples … Guyana’s fiscal regime seems quite comparable to other regions in the same state of maturity,” Boodoo said.
“Guyana… would be an interesting place for future E and P [Exploration and Production] companies… Guyana, obviously, is one of the most interesting places in the world right now. E and Ps from across the globe are looking at Guyana and deciding ‘Is this a place for me to invest? Is this a place where I should go try to find some resource? If I do that, what is their fiscal regime compared to other places that I can go invest?” her boss added.
Rystad says that the average government take of 60% in Guyana is indeed favourable when compared to other large offshore producers.
“However, for countries that only recently opened up for E&P activities – such as the Falkland Islands, Israel, Mozambique, and Mauritania–the government take is in the range of 50% to 65%,” he added.
The company believes that “in order to attract investments from international E&P companies to kick-start their offshore ambitions, frontier countries often need to sweeten the pot with favourable fiscal terms.”
Guyana, it said, has followed this pattern and upon analysis, it can be argued that it worked in bringing companies here but with the many successes here it will have to decide if it changes that regime. “In retrospect, one can argue that the government has succeeded in generating the activity they were hoping for,” Erlingsen said.
Rystad provides data, tools, analytics and consultancy services to clients exposed to the energy industry across the globe, its website says.