Guyana’s oil revenues fell 38 percent below expectations in 2020

Guyana’s Production Sharing Agreement (PSA) with ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), is notoriously lax in the regulatory strength it gives to Guyana and offers extremely generous terms to the supermajor and its Stabroek block partners.

From its fiscal terms, former Energy Director, Dr. Mark Bynoe, had said that Guyana should expect about USD 300M from the sale of its crude in 2020. This was already a meager amount for oil as cheap to produce and as valuable as Guyana’s, but the sale of the Stabroek block’s Liza crude did not even meet two-thirds of that amount. Guyana received just USD 185M from the sale of its crude in 2020 – 38 percent below the former Energy Director’s expectations. This sheer drop may mainly be attributed to two major occurrencesthe global oil price crash and a tumble in ExxonMobil’s

production due to flaring at the Liza Destiny Floating, Production, Storage and Offloading (FPSO). The oil price crash is mainly attributed to the fallout from the COVID-19- pandemic and the Russia-Saudi Arabia oil price war. The first case was detected late in 2019 but the virus began to spread out of control in early 2020 and reached Guyana by March. By then, the oil price had already debilitated rapidly. Brent, the standard Guyana’s Liza crude is being traded against, was comfortably over USD 60 a barrel early in 2020, but crashed to USD 20 by spring. Worse off than Brent, West Texas Intermediate – a US standard – fell to negative prices in April. The pandemic had driven demand so low that American energy companies ran out of room to store petroleum. As for the other cause of the oil price crash, talks between Russia and the Saudi-led Organization of the Petroleum

Exporting Countries (OPEC) over proposed oil production cuts broke down in March last year, shortly after the genesis of the global expansion of the virus. OPEC styles itself as a stabilizer of oil markets, and is in concert with Russia. The disagreement lasted nearly four months. By the end of June, Russia and Saudi Arabia agreed to production cuts. To demonstrate the effect of the pandemic and the oil price war on revenues, Guyana’s first million barrels or so got USD 55M into the Natural Resource Fund (NRF) in February. In May, the second lift got Guyana USD 35M. To compound the drop in the oil price, ExxonMobil flared gas way longer than the Environmental Protection Agency (EPA) expected it to, as revealed by former Head of the Agency, Dr. Vincent Adams in midJanuary 2020.

(Kaieteur News)