Guardian-Floodlight investigation highlighted concerns about both the terms of the ExxonMobil deal and the environmental consequences for Guyana

Guyana is seeking a much better deal for any future oil deals than their current contract with ExxonMobil, which is licensed to explore for oil in the South American/Caribbean country.

Guyana has become one of the most desired oil exploration spots after an ExxonMobil-led group, which also includes the US-based exploration firm Hess Corp and the Chinese oil company CNOOC, discovered about nine billion barrels of recoverable oil and gas off the coast the country. However, a Guardian-Floodlight investigation (August 17) yesterday highlighted concerns about both the terms of the deal and the environmental consequences for Guyana.

The investigation quoted industry analysts at IHS Markit, who said the Guyanese government was receiving a below-average return on ExxonMobil’s projects. According to the Institute for Energy Economics and Financial Analysis (IEEFA) ExxonMobil receives more than 85 per cent of the proceeds as a result of the government and public largely “absorbing Exxon’s costs”.

ExxonMobil defending the deal with Guyana

ExxonMobil has said the deal would continue to generate billions of dollars of revenue for Guyana. Yet the investigation found its government had reported it made just $309m (£225m) from the projects since they began, while ExxonMobil and its partners had brought in roughly $1.8bn, according to Tom Sanzillo, director of financial analysis at the IEEFA.

The Guardian is reporting that Guyana will aim to increase its oil royalties and revamp other contract terms as part of a new profit-sharing agreement (PSA) for future crude and gas projects now in its draft stage. It expects to install an energy regulatory body this month and will disclose the winner of a one-year contract to market of oil production from the Stabroek block, which is located about 120 miles off Guyana.

The new PSA will be tougher than that negotiated with the ExxonMobil consortium and could be ready “within six months or so”, said Guyana’s vice-president, Bharrat Jagdeo, on the sidelines of the Offshore Technology conference in Houston.

ExxonMobil had told the Guardian: “The terms of the contracts are competitive with other agreements signed in countries at a similar resource development phase. Our work and the support of the government of Guyana are the basis of a long-term mutually-beneficial relationship that has already created significant value for the people of Guyana.”

The company added: “These resources are being brought on line at a record-pace for the industry, resulting in significant cost savings for the government and its industry partners as multiple developments are being processed.”

The Guyanese government has been at odds with ExxonMobil over flaring at its Liza project, the first one producing crude in Guyana after discoveries.

New PSAs will include higher royalties and mechanisms for deducting costs

The new PSAs will include higher royalties and mechanisms for deducting costs from investment.

“We have made it clear that in any new PSA we negotiate for those blocks, the conditions will be very, very different than the ones from the Stabroek block,” Jagdeo said, including higher royalties and mechanisms for deducting costs from investment.

Previous Guyanese governments have been criticised for the lucrative terms provided to companies involved in the Stabroek block.

“All the deficiencies of this contract will be addressed,” Jagdeo said.

He agreed with the argument in the Guardian that Guyana’s oil sector was being developed more rapidly than its ability to put in place the necessary capabilities and frameworks to ensure adequate oversight and management, and he detailed steps the government is now taking to increase its regulatory authority. But, he added, “our policy is to get as much of the oil out of the ground as quickly as possible … . We have to make use of this resource while there’s still demand”.