Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 163
Introduction
Following part one of this column, which was taken up by Kaieteur News, the Ministry of Natural Resources issued a defensive statement attacking the newspaper for questioning why ExxonMobil reported US$10 billion in profits while Guyana received only US$2.6 billion. Logically, as equal profit-sharing partners, Guyana should receive the same amount in profit oil as the companies combined.
Promoting the interest of the oil companies, the Ministry deflected from this accounting irregularity by attacking the newspaper’s competence rather than addressing the legitimate concern. The source of the statement is unclear but its objective is certain: to restore credibility to the government which could offer no explanation but only “a formula”. By putting that statement on its website – the Department of Public Information – the Ministry, the Government and its mouthpieces has done themselves no favour.
Let us dissect that profit share allocation.
The facts
Here are the facts: There were 225 oil lifts in 2024. Four went to Guyana in the form of in-kind royalties and 56 went to profit sharing (Government 28 and Oil Companies 28). That leaves 165 lifts, all of which went to the oil companies for cost recovery. The oil companies did not tell us this breakdown, nor did the Government – which probably did not try to find out. This information comes from scouring the Bank of Guyana’s Natural Resource Fund reports and the Minister’s Budget Speech.
At approximately $80 million per lift, those 165 cost recovery lifts represent roughly $13.2 billion in value flowing to the companies. From analysing their financial statements, we can determine that only 22 lifts ($1.8 billion) went to actual current year expenses, while a staggering 143 lifts ($11.4 billion) represented recovery of prior years’ costs. It is worth noting too that expenses included a significant element of non-cash expenses as well, such as decommissioning, amortisation and lease provisions.
The numbers become even more puzzling when we consider that despite receiving only 28 lifts ($1.9 billion) as their legitimate profit share, the companies reported over $10.4 billion in profits in their financial statements – more than five times their actual profit oil entitlement. This suggests a troubling pattern where massive historical cost recoveries are treated as current profits, a fundamental distortion that demands immediate investigation, attention, transparency and disclosure.
The Accounting Rules
Guyana is an IFRS subscribing country and companies operating here should provide information to enable a reader to understand and appreciate the numbers. Yet the 2024 financial statements of the oil companies create more confusion than clarity. Under IFRS, the principle of transparency demands that financial statements provide a true and fair view of a company’s financial position and performance. Readers should be able to understand the source of revenues, the nature of expenses, and how profits are generated. Yet when we examine these oil company statements, we find a labyrinth where massive cost recoveries somehow contribute to profit calculations without clear explanation of how historical reimbursements become current earnings.
The fundamental question becomes: Are these companies meeting their IFRS obligations to provide clear, understandable financial information? When a company receives $11.4 billion in cost oil recovery but reports this in a way that inflates profits to $10.4 billion – while their actual profit entitlement is only $1.9 billion – something is seriously wrong with either their accounting practices or their disclosure standards.
IFRS requires that companies explain material transactions and their impact on financial performance. Yet nowhere in these statements do we see adequate explanation of how the petroleum sharing agreement works, how cost recovery differs from profit generation, or why reported profits bear no relationship to actual profit oil received. This is not a matter of disclosure – as important as that is. It is an attempt to distort and deceive. it’s a fundamental failure to meet international accounting standards that Guyana, as an IFRS jurisdiction, should be enforcing.
Warped Accounting Practice
It defies any logical, decent accounting rule that Exxon and Co would recognise hundreds of billions of Guyana dollars in deferred tax liability which they will never pay but refuse to recognise on their books expenditure the recovery of which is guaranteed by the Agreement. Just think about the boldness of their position. They carry massive deferred tax liabilities on their balance sheets which they know they will never pay since these taxes are paid out of Guyana’s generous cost recovery and tax certificate mechanisms. Yet they forget basic accounting principles when it comes to their guaranteed unrecovered costs.
The general rule of accounting is that expenditure incurred in one period to be recovered in a future period, even in the absence of any contractual arrangement, is recognised as assets. Even that part of the motor car insurance premium that covers months into the next accounting period is treated as a prepayment in business accounting. The 2016 PSA makes cost recovery a contractual right, not a discretionary hope. Yet these companies treat guaranteed cost recovery as uncertain while booking tax obligations they will never pay as concrete liabilities. Had they applied that principle, they would have treated the recovery as the exchange of an asset (cash or oil) for another asset (recoverable costs).
This double standard allows them to inflate current profits by treating cost recoveries as immediate revenue while hiding the true ongoing impact of future recoveries on Guyana’s oil revenues. When companies selectively apply accounting standards based on what makes their numbers look better, that is not compliance – it is flagrant and deliberate manipulation. Both the Coalition and the PPP/C have failed to recognise the avarice of Exxon and its partners, signalled when, at the very beginning, they overstated pre-production costs. Or when the local books failed to account for the proceeds of sale of interest in the Stabroek Block.
What the oil companies are expecting is that all Guyanese – and indeed Yahoo Finance, Reuters, Bloomberg and shareholders will believe that all these billions of barrels of oil come at no cost – or, in the case of Exxon, by mainly Depreciation and amortisation which accounted for 63% of its total operational expenditure in 2024, up from 51.2% in 2023. There’s the well-known saying that there is no such thing as a free lunch. Our oil companies have profits free from of any cost of sales.
It gets better
Sometime in 2057 when the wells run dry and Exxon has departed, maybe pocketing the Decommissioning Fund on the way out – the next generation will ask, who is it that signed that Agreement and why did no one call it for what it was: the rip off of the century? Or why did no subsequent government think of changing that abomination? In fact, the PPP/C has made Trotman look naïve. By failing to impose permissible ring-fencing, we are now financing our very exploiters. Not even the enslaved or the indentured workers would have tolerated that. Guyana now helps to finance our own exploitation. In 2023 and 2024, we co-financed G$114 bn of Exploration Expenses, we split the non-cash accumulated depreciation charge, Asset Retirement Obligations and Lease Liability, all amounting to over $700 Billion. See the table below.
NB: Depreciation, depletion, amortization and Accretion figures are based on 2024 income statement while Lease Interest and Finance Cost are based on the aggregate figures of 2023 & 2024.
Conclusion
It must sicken the national stomach that after all the talk about sovereignty and risks by investors, we are seeing the companies already repatriating capital from Guyana. So, they are not only witnessing the rape of our natural resources and the hijacking of our country. They are witnessing, as Exxon’s exploration programme comes to an end, a small group of companies assuming the role of managers, earning the lion’s share of the country’s resources. We only have to bear it until 2057.