Guyanese on social media were euphoric last week when it was announced that the country now has at least 4 billion barrels of recoverable reserves. This would imply a capacity to produce 750,000 barrels per day. OilNow reported Minister Trotman as being very optimistic and even carried the headline “The coming oil bonanza.” Members of…
On Thursday June 22, 2018, the Wall Street Journal published an article titled “Eureka! Giant Oil Find Set to Bring Guyana Startling Riches—Maybe”. The Wall Street Journal is among the top business newspapers in the world. It is widely read by many investors and business people such as Warren Buffett and Bill Gates. Thus, it…
On June 1st, 2018 the Stabroek News published an article discussing a report by Norway’s Rystad Energy. Other Caribbean newspapers have published similar articles. However, there appears to be inconsistencies in the report that need clarification. Here are a few points of concern: It was stated that Rystad is forecasting 600,000 barrels per day (bpd) in…
Guyana has struck oil but for the panelists at a discussion on Wednesday there is no reason to celebrate. In fact one panelist argued that there are actually grounds for saying that government acted illegally in signing to such terms. On Wednesday, the Moray House Trust held a panel discussion where economists Collin Constantine and…
On May 17th, 2018 the Stabroek News published a letter by Mr Clement Smith in which he questioned the motives of A Fair Deal for Guyana with respect to challenging the oil contract. In that letter he stated, “But the saddest part of all is that local activists are getting involved.” We disagree with Mr…
The oil contract contains a loophole that may tempt the oil companies to get around the 14.25% of revenues minimum limit cited by some analysts. The only guarantee is the 2% royalty, but the 50%/50% profit share can be exploited such that Guyana’s average take is less than 14.25% in earlier periods. On April 1st, 2018…
We explored the idea of the resource curse in six previous columns before analysing the cost aspects of the oil and gas contract. We took a break from this topic in the previous three successive essays. Last week’s essay looked at how recurring costs could have an interesting effect on the long-term average cost oil…
By now many Guyanese would have heard about the 14.25% effective royalty, which combines the 2% actual royalty enshrined in the contract, the 50-50% profit share and the 75% cost-recovery cap. According to Article 11 of the Petroleum Agreement between the Guyana government and ExxonMobil subsidiaries, the cap on cost recovery is monthly. This…
The previous column critically analysed the cost components of the production sharing agreement with ExxonMobil. We noted that the legal aspects did not cover all the possible cost scenarios, which is crucial for PSA-type contracts. In keeping with the theme of this series of essays, I argue the legal protection against cost uncertainty does not…
Economist Tarron Khemraj says that from all of the analyses he has seen of the oil deal for the Stabroek Block, Guyana will end up getting just around 37% of the gross revenues while ExxonMobil and its partners will cream off the rest. See more here
