Category: The Road to First Oil

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 165

Introduction

Chevron has won the right to acquire Hess’s 30% share in the Stabroek Block. This is not a direct acquisition but one made at the shareholders level where Hess shareholders will receive 1.0250 shares of Chevron for each Hess share. Exxon had challenged the transaction claiming that it had the right of first refusal but the International Chamber of Commerce in Paris ruled otherwise. Exxon’s challenge stemmed from its interpretation of a joint operating agreement (JOA) that governs the Stabroek Block. The agreement included a “right of first refusal” clause, which Exxon argued gave it the right to buy Hess’s stake before it could be sold to a third party. The flaw in Exxon’s thinking is that this was not a Guyana/Stabroek Block transaction.

These columns had argued that Guyana ought to have stepped in and bought the share, paying out of future profits. Clearly, this Government has no appetite to challenge anything the Stabroek Block partners do. But it is more than that. Vice President Jagdeo, in an apparent endorsement of Chevron’s success expressed confidence that Chevron will serve as Guyana’s guardian angel. Such an opinion reflects a fundamental misunderstanding of how multinational oil companies operate and what the recent arbitration victory actually reveals about corporate priorities.

Jagdeo’s misguided logic

Let us try to understand Jagdeo’s convoluted idea. He argues that “having another US major that had a kind of well, tense relationship with Exxon… that tension between the two could serve our country better” because Chevron will be “making sure that those costs are minimised”, thus increasing Guyana’s take which currently stands at about 14%. Those sentiments reveal dangerous naiveté about corporate motivations. Jagdeo believes Chevron will somehow prioritise Guyana’s interests over profit maximisation – a fundamentally flawed assumption. All he had to do was read the statements coming out of Chevron, or read the Joint Operating Agreement signed by Exxon, Hess and CNOOC.

In fact, central to their case before the Arbitration Panel, was the interest and their duty to their shareholders. ExxonMobil CEO Darren Woods stated the company had “a clear duty to our investors to consider our preemption rights to protect the value we created through our innovation and hard work.”

And following the approval of the deal, Chevron’s CFO Eimear Bonner emphasised that the deal would “drive significant free cash flow and production growth into the 2030s” and achieve “$1 billion in annual run-rate cost synergies.” And CEO Mike Wirth stated it would “drive greater long-term value to shareholders.”

Guyana not in oil companies’ equation

When asked about operational changes, Wirth told American television that his company anticipates headcount reductions due to “overlaps.” Notably absent from any of these shareholder communications was any mention of looking out for Guyana’s interests or serving as a watchdog over ExxonMobil’s costs. Jagdeo, the policy wonk, should know better. The 2016 Petroleum Agreement explicitly designates ExxonMobil as the operator with comprehensive authority over day-to-day operations. This operational control provides ExxonMobil with several crucial advantages that limit Chevron’s ability to effectively police costs. Chevron, as a non-operating partner, will have limited ability to challenge these decisions effectively, particularly given that ExxonMobil can leverage its technical expertise and its 26 years in the Block, to defend expenditure decisions.

As an economist, Jagdeo understands that when costs are largely recoverable and profits shared proportionally, there is extremely limited incentive for cost reduction, let alone cost policing. (They get back 100% of cost but only 50% share of profit). Nor does he seem to understand boardroom dynamics. Even after the bitter arbitration dispute, ExxonMobil immediately welcomed Chevron as a partner, stating: “We welcome Chevron to the venture and look forward to continued industry-leading performance and value creation in Guyana for all parties involved.” Indeed, there is no evidence internationally that show joint venture partners in oil or other resource projects acting as effective watchdogs for host governments. Their primary obligation is to their shareholders, not to the host country.

The Audit Reality Check

If Jagdeo believes that Exxon and CNOOC are inflating costs, then he is admitting that the three annual audits of the oil companies’ books allowed by the Agreement are ineffective, a waste of time and money. It is disturbing even to contemplate that the government expects Chevron, the new kid on the block, will spend time seeking to solve Guyana’s audit problem. The issue is ineffective contract administration and weak government oversight which Jagdeo’s approach is seeking to outsource to Chevron! Instead of protecting the country’s interests through robust regulatory mechanisms, Jagdeo seeks to abdicate its duty.

Conclusion

VP Jagdeo’s faith that Chevron will look out for Guyana’s interests represents dangerous naiveté about corporate motivations. The recent arbitration battle demonstrated that both ExxonMobil and Chevron are primarily concerned with maximising returns to their shareholders, not protecting Guyana’s fiscal interests. In fact, if they were that interested in Guyana’s interest, they would proactively agree to renegotiating the 2016 Agreement. But Jagdeo does not want to hear that. The Joint Operating Agreement dynamics, combined with cost recovery mechanisms in the 2016 Petroleum Agreement, actually align the interests of all foreign partners against those of the host government.

Guyana’s interests will be protected only through robust government oversight, technical expertise, and strong contractual frameworks – not through hoping that one Stabroek Block contractor will police another. We should not contemplate, let alone afford to outsource our country’s oversight responsibilities to foreign oil companies whose primary allegiance lies elsewhere. Jagdeo’s statement does not inspire confidence. 

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 164

“State capture is understood as efforts by private actors and public actors with private interests to redirect public policy decisions away from the public interest, using corrupt means and clustering around certain state organs and functions.”: Transparency International, Examining State Capture (2020), p. 8

Introduction

Exxon last week, through John Colling, its local Chief of Finance, reacted sharply to an article appearing in the Kaieteur News based on last week’s column For the Good Times which cast doubts on the company’s 2024 financial statements. It was the first such letter and one wonders whether the outrage was caused by the letter itself or the references to Yahoo Finance and Bloomberg, two prominent members of the financial press. I subsequently sought to engage Mr. Colling and started a conversation with him by asking several questions. There is one further question I have for him: tell me John, do all of these billions in sales have no cost?  

Let’s get to today’s column for which the quotation above seems dangerously relevant – the capture of the state by the oil companies, in collusion with or independent of state actors. Transparency International reminds us that state capture is no relic of corrupt old regimes – it is alive and well wherever powerful private interests find weak institutions and politicians to bend to their will. We missed the signs from 2016 when Exxon “roughed up” GGMC’s top managers and when David Granger made Raphael Trotman sign one of the worst petroleum contracts for the past fifty years. Signs that were reinforced from the time the PPP/C came to power in 2020 and reneged on every commitment to robustly challenge the company and the contract.

The Minister was serious

The pattern continues with more brazenness and absurdity when the minister responsible for the sector can justify the breach of promise about an independent Petroleum Commission by saying that this will lead to delays. Yes, he was serious! It is that mindset that shapes us into a textbook example of how the seeds of the resource curse are planted, nurtured and promoted – not by accident, but by design. Not by divine forces but by Irfaan Ali and Bharrat Jagdeo.

It started with concealment of the 2016 Agreement and the so-called signing bonus. More recently we have seen the Government batting for indefensible accounting, concealment of information, secret deals on sports, the gas to energy project, the company’s head office building and manipulation of the Agreement itself. The government – the supposed guardian of the public interest – has become the junior partner in its own capture.

Unreadable books

By any standard and despite its protestations, Exxon’s financial reporting in Guyana is incomplete, opaque, and at times downright misleading. It is like accounting for dummies, which I covered in last week’s column and a letter in yesterday’s SN. I do not think for one minute that these are cases of innocent oversight. ExxonMobil is not a naïve operator; it employs some of the world’s most sophisticated accountants, lawyers, and lobbyists. It knows exactly how to bury costs to inflate profits, confident that “the formula” explains everything, and that it can get away with ii.

PPP: From Gatekeeper to Junior Partner and cheerleader

Sadly, this is not a failure of corporate responsibility, but of governance. When Transparency International defines state capture, it does not single out only the private actors. It warns that public actors – the very government ministries and officials entrusted to protect the national interest — become co-opted too. The party that once promised to revisit the abominable contract now hides behind excuses and empty talk of ‘stability.’ It tells the people it cannot push Exxon too hard — we might scare away investment or worse, and weaken our security position against Venezuela’s claim. The same kind of thinking that brought Jim Jones – and shame – to Guyana.

The PPP government has made itself a willing accomplice to Exxon’s entrenchment. It refuses to renegotiate the 2016 agreement even though the text permits it. It stalls the creation of an independent Petroleum Commission, knowing full well that genuine independence would mean rigorous audits, clear accounts and proper cost verification.

When a government that should defend the people’s patrimony instead defends the company’s privilege, that is state capture in its purest form.

Cricket lovely cricket

Exxon has so convincingly turned accounting into the magician’s trick, they needed a popular national distraction. President Ali calls on “Alistair” to meet Guyana’s franchise cricket team, reminiscent of the Saudis and the Qataris in the new trend of sportswashing.  Exxon knows that cricket is no ordinary sport in Guyana and spends freely to wrap its name around our players, our national stadium and placing the national flag in the hands of spectators. In the spirit of panem et circenses, (bread and circus), it has achieved a public relations coup, bought cheaply with sponsorships while we strain to pay their taxes from funds otherwise available to build roads, schools and hospitals.

The President plays his part, granting unlawful tax concessions to Exxon and those more directly involved, helping to boost the Exxon’s image and distracting from the exploitation of the country – further evidence of state capture. It does not end there. Government has pulled the oil companies into the gas to energy project, with the trademark no disclosure, no accounting and no reporting. The billions in 2024 cost oil no doubt hide huge sums attributable to the project. Exxon bankrolls it — but on what terms? Who verifies the billions that will be claimed as cost oil before Guyana gets its share? With no independent Petroleum Commission in place, we are left to trust that the same players who are not forthcoming about costs on the Stabroek Block will suddenly discover the virtue of full disclosure.

Conclusion

This entire charade is crowned by fear. The fear that if we push Exxon too hard, it will pack up, and take America’s security shield with it — leaving us exposed to Venezuela’s aggression over the Essequibo. That threat is real. But using it to excuse gross imbalance is the final stroke of capture. When a government is so compromised that it cannot even use the renegotiation clause for fear of angering its corporate patron, it loses the moral and practical authority to govern in the people’s interest.

Jagan, Damon, Cuffy, Rodney and the Enmore Martyrs fought for our freedom, our sovereignty and our country. Sadly, Granger, Trotman Jagdeo and Ali seem bent on reversing those heroic contributions. Transparency International’s warning should be pinned to every office wall from Main Street to the Ministry of Natural Resources: state capture is not just corruption — it is the gateway to turning oil wealth into oil dependence, oil anger, oil poverty and ultimately the oil curse. 

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.

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 162 – 20 June 2025

Introduction

Columns 159 – 161 examined the individual income statements of each Stabroek Block contractor in detail. Today’s column shifts focus to analyse the combined results of the three entities, providing a broader perspective on the collective financial performance and strategic positioning of the consortium operating Guyana’s most significant petroleum asset.

Before doing so, however, let us have a brief look at a report in the Kaieteur News of 17^th. June quoting Mr. Vickram Bharrat, Minister of Natural Resources on the state of relinquishment provisions on the Petroleum Agreement for the Kaieteur block.

The Kaieteur block agreement was signed with Exxon in April 2015 with a four-year initial exploration period that should have expired in April 2019 and two three-year renewals to 2025. At the end of the initial period (to 2019) the company should have relinquished 45%, a further 20% in 2022 and the balance in 2025, except for any area for which a production licence is issued, or any extension for cause. However, according to a statement from the company an extension was granted to February 2026 on the grounds, cited by the Minister, that the government was “compelled” by law to do so. Such a statement reveals a fundamental misunderstanding of the Production Sharing Agreement or deliberate deflection of responsibility.

That statement is false and would not be made by anyone with a passing understanding of Article 4.1(e), which states, unambiguously, that the Minister “may” extend exploration periods upon a showing of good cause – making his claim of legal compulsion demonstrably false while revealing dangerous regulatory weakness.

The danger is aggravated by the failure of the company to meet the conditions required to qualify for extensions. Despite only one sub-commercial well being drilled since 2015, no mandated relinquishments have occurred despite deadlines passing in 2017, 2019 and 2022. Notably, ExxonMobil simply walked away rather than meeting drilling commitments – failures which should disqualify from any extension eligibility under any competent contract administration.

This regulatory capture traces back to the Jagdeo Administration’s overly-generous force majeure relief for the entire 26,806 sq KM Stabroek Block following the Suriname vessel boarding incident – a vast distance from actual operations. With Jagdeo now heading petroleum policy, this permissive approach has become institutionalised, creating an environment where industry wishes consistently trumps national interest while the government rubber-stamps requests without rigorous scrutiny.

The PPP/C Administration has watered down its campaign commitment, first to renegotiate the 2016 Petroleum Agreement, then to better contract administration and reform, then to sanctity of contract and the latest, that the Minister is legally compelled to extend the duration of a petroleum agreement. To sum up. The PPP/C Administration has been unable to cross the lowest of the low bars that it has set itself.  

That the individuals responsible for the petroleum sector are so poorly informed must be a serious cause for concern. Note: This Agreement was signed days before the 2015 elections.

Now, back to those financial statements.

Challenging presentation of annual reports

Nearly eight years after the signing of the now-infamous 2016 Petroleum Agreement, it is clear that neither the foreign oil companies nor the Government of Guyana have any real interest in accountability. While the country’s leaders boast about revenue inflows, the foundational elements of transparency – consolidated project accounts, proper cost audits, and consistent financial reporting – are glaringly absent or deliberately obfuscated. The Guyanese people remain in the dark as to whether they are receiving even the bare minimum promised under the Agreement, including their so-called 50% share of profit oil.

Annex 2 of the Agreement, which sets out the companies’ reporting obligations, is weak and ineffectual. Reports are submitted solely to the Minister, with no legal requirement for publication or independent audit. There is no consolidated field-level financial statement, no disaggregated cost data, and no mechanism to ensure that the separately published financial statements with limited, inconsistent, and opaque information is accurate, reliable and timely. As a result, neither Parliament nor the public can verify whether the oil companies are overstating costs or underreporting profits. To correct this, Government should mandate publication of all Annex 2 statements, require independent project audits, and adopt the EITI standard in full.

What makes matters worse is the inconsistent, and in some cases misleading, financial disclosures by the oil companies themselves – all audited by the same firm. Only CNOOC acknowledges the joint operation classification under IFRS 11while Hess and Exxon remain silent on the nature of the arrangement. On taxation, CNOOC correctly states that the Government pays the contractor’s income taxes out of its share of profit oil. Exxon evades the issue entirely, while Hess claims to be subject to a 25% corporate income tax, even producing a tax computation – a misleading practice at best, and a dishonest one at worst.

The contents of the Income Statements are all different. Even the reporting currency lacks consistency. Hess reports in U.S. dollars, CNOOC in millions of Guyana dollars, and Exxon in Guyana dollars. Then there are differences in treatment and disclosure of items like royalties, retirement obligations and Decommissioning and Royalties. Such differences frustrate comparability, undermine audit quality, and suggest that the companies are dictating the terms of disclosure to their auditors – not the other way around.

Since the Government pays the corporate tax of all the companies from its share of profit oil, there should is no differential treatment. Yet, the effective tax rate of tax on the income earned by each of the companies differs significantly. This is not helped by three divergent disclosure notes, the reason for which is far from apparent. Even more troubling is the illusion of equity embedded in the so-called 50/50 profit-sharing arrangement. The financial statements of the oil companies show multibillion-dollar earnings while Guyana’s share remains comparatively meagre. The ratio for the year 2024 and cumulatively for the five years to December 2024 is in excess of 5:1.

Government 

But the Government too is guilty of opacity, if not deception. Public filings of the Exxon and Hess in the US suggest that the Government issues them with proper tax certificates confirming the discharge of their Guyana tax obligations. See Article 15:5 of the Agreement. Two problems: no money is paid out of Guyana’s share of profit oil and there is no oil company taxes paid into the Consolidated Fund. The rules of EITI, the principles of accounting, and transparency require full, complete and comprehensible disclosure. Whichever accounting route is followed – whether the taxes are deducted before transfer to the Natural Resource Fund, or after – the outcome is equally misleading.

Because the NRF has a significant component of intergenerational funds, the Government has an interest in window-dressing the balance – to make it seem better than it is. It is therefore comfortable manipulating the balance by not reflecting the amount of the tax required to be paid on behalf of the oil companies. The oil companies for their part, are not concerned about the small matter of accountability and transparency, or whether the Government manipulates the NFR or whether Tax Certificates are issued for money not received.

Compounding these financial distortions is the government’s ongoing failure to enforce one of the few clear powers it has under the Agreement: the relinquishment clause. Exxon and Co. was required to surrender 20% of the Stabroek Block contract area nearly a year ago. Instead, we are told the Ministry of Natural Resources is still “finalising” the areas to be given up. See also the introductory note on the Kaieteur Block for evidence of the wider incompetence and laissez faire attitude to see how our marine petroleum assets are managed.

Next week, we will close out on the financials by looking at the companies’ aggregated balance sheets and the state of the Natural Resource Fund.

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 161 – 12 June 2024

Confusion over Oil profit  

Last year, my summary column discussing the 2023 audited financial reports of Stabroek Block contractors had the caption “Oil companies have earned five times more from oil than Guyana. Modest investment, gargantuan returns.” If anything has changed, the money deluge has continued to flow upward and faster in the direction of those contractors. But before we look at those incredible numbers, maybe a word about Vice President Jagdeo’s exchange with a reporter of relevance to today’s column might be revealing.

Reporter to Jagdeo. “Can you explain Exxon and its partners reporting that their profits for 2024 being 10 billion US dollars, but Guyana only got 2.6 billion, despite it being a 50-50 profit sharing”.

Jagdeo’s response: “So I saw something about Exxon reporting a trillion dollars in profit over the three years and they said that the government got about 1.3 trillion dollars. So that’s about consistent with the formula which says that 14.5 percent of the 25 percent which is set out for as profit sharing would result in that configuration and they would have 10.5. So that’s consistent from what I saw. It can’t be any different.

“In these years they have to get less profits than we have received because of that formula. They have spoken about paying back the capital, which is a different matter about paying back the capital invested which comes out of the 75 percent of revenue allocated for that purpose. So, we can’t conflate the two.

“They’re very different and it’s consistent with the formula. And just to tell you that to give you an indication if they say 1.3 trillion dollars we got since the beginning of oil that’s less than this year’s budget. One year budget but that’s what we got from the beginning.

So that conforms what we have been saying because we passed five budgets so far. So entirely clear.”

The Vice President’s shutting down the question with the words “So entirely clear” suggests that he was confused by his own garbled logic for all the world to see. For Guyanese, it was embarrassing to see the Vice President with responsibility for the dominant petroleum sector display such a poor knowledge and understanding of the Petroleum Agreement which has been around in its present form for nine years, and in its earlier form for twenty-six years. What makes it regrettable is that his response – because of its egregiously flawed answer, might unfortunately be seen and used by the oil companies as a validation of the accounting methodology, content and form when it really is just the opposite. For readers’ benefit let us recap the correct formula for the allocation of profits between the Government as a one-half party and the oil companies as a collective, as the other.  

Profit is arrived at taking after a) the payment of a royalty of 2% of all petroleum produced and sold, net of deduction of quantity used for fuel and transportation; and b) deduction of recoverable cost up to a maximum of 75% of total revenue. By an amendment to the Agreement, the government and the oil companies agreed that “royalties” are not a recoverable expense charged to the operations so that much is set aside for the government. The balance is shared between the Government and the Contractor for each Field in the following proportions: Contractor fifty percent (50%) and Minister fifty percent (50%).”

Applying the formula (100% – [2% + 75%]) ÷ 2 = 11.5% – the government receives a minimum of 13.5% (2% royalty plus 50% of profit) and the oil companies get 11.5%. Jagdeo’s 14.5 % and 10.5% are wrong. He also advances the novel proposition that there is a 75% allocation for the payback of capital invested. That too is incorrect. It is a cap on recoverable expenses for any year, whether for capital or operating expenses. And then he throws in the dead herring about Guyana’s share of profit oil without acknowledging that the government pays the taxes of the oil companies for which they are issued a Certificate of Taxes paid by someone or the other.

Back to the numbers

Table 1.  

Source: Audited financial statements

The Table is constructed from the audited financial statements of the three companies for 2024. The total profit before the mythical tax for the three companies amounted to G$2,686,308 Mn of which Exxon’s share is 47% (2023 – 46%), Hess at G$526,236 Mn. or 33% (2023 – 32%) and CNOOC of 21% (2023 – 22%). These numbers are consistent with 2023. Readers can turn to Columns 157 – 159 for a review and commentary on the 2024 financial statements of each of the three oil companies, including both their income statement and balance sheet.

Having commented in the past years about the lack of comparability of the financial statements, I am amazed that the auditors appointed by the Government at a considerable cost, never seem to have recognised this self-evident fact. Because of what is stated in the introduction, this should surprise no one.

Before any discussion on these 2024 results, I share with readers the profits earned by the oil companies from 2020 – 2024, compared with the returns to the Government over the same period.

 Table 2: Cumulative numbers

In Column 162 to be published next Friday, we will have a general discussion on these Tables.