Category: The Road to First Oil

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.

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 160 – 10 June 2025

Introduction

Today’s column addresses the audited financial statements of CNOOC Petroleum Guyana Limited, the third-ranking partner with a 25% interest in the Stabroek Block operating under the 2016 Petroleum Agreement. Like Exxon and Hess, CNOOC is also a branch of an external company, in this case, incorporated under the Companies Act of Barbados. Unlike Exxon and Hess, CNOOC maintains a very low profile in Guyana, leaving the heavy PR lifting to Exxon, the designated Operator under the Agreement. Its ultimate parent company is the China Offshore Oil Corporation, established in the People’s Republic of China (PRC).

But CNOOC’s annual report is not another corporate success story wrapped in glossy annual reports and feel-good community photos. This is cold, hard evidence of a foreign state-owned enterprise that systematically extracts wealth from non-renewal Guyanese resources while operating under the same controversial 2016 Petroleum Agreement that continues to benefit foreign businesses over the national interest.

Like its co-venturers, CNOOC shares in the 2024 bonanza, its income statement revealing profits that would make any multinational corporation green with envy, sweetened through a tax arrangement under which its taxes are paid by the Government of Guyana.

Financial Statements

The rest of this column examines the financial statements of the company’s participating interest in the Stabroek Block. All information sourced from the Branch’s financial statements.

Revenue

The company’s revenue for 2024 reached G$819.1 million – a 59.4% increase over 2023. That figure includes $22.9 Mn which the company describes as “Deferred income tax expense”, presumably the amount which the Government will pay on its behalf under Article 15.4 of the Agreement. The notes to the financial statements disclose that all the oil from its share of the operations is sold to China Offshore Oil (Singapore) International Pte Ltd, a member of its group.

While total expenses for 2024 amounted to G$265.5 million, up 68% from 2023, the largest portion was not actual cash expenditure but a book transaction following accounting convention. The largest single expense is Depreciation, depletion, and amortization of G$186.2 million, representing 70.1% of total expenses – in other words, more than twice as much all other expenses combined. Operating costs was G$64.4 million, or 7.9% of revenue, revealing the Stabroek operation’s efficiency: once wells are drilled and production units installed, the cost of extracting each additional barrel is minimal.

After all expenses and the Deferred Tax Expense, the company recorded net income of G$530.7 million – a 66.5% increase from 2023. Expressed another way, the net profit margin is a massive 64.8%.

The Balance Sheet

Total assets increased during the year by 28.9% to G$1.55 billion, or 28.9%. Of this, property, plant and equipment accounts for G$1.548 billion, or 99.9% of total assets. The company’s balance sheet shows that it held just G$60 million in cash, to meet any eventuality which may arise. The balance sheet indicates that the amount due to Affiliates reducing by $136 Mn, of which the bulk was “Financing” of $107 Mn, and the remainder was “Investing”. These items need explanation since the oil companies have repeatedly stated that no interest is charged on the operations.

The liability side shows how the assets are financed – by credits, equity and retained earnings. Let us look at these. Credits have decreased from $323 Mn. to $191 Mn, or roughly 40%. Then there are the tax liability and Deferred income tax liability which makes up 18.3% of the total assets. The balance of $1,074.9 Mn, or 70% is financed by retained profits, and that is after the payment of $104.3 Mn dividends in 2024. 

The shareholder’s equity is entirely made up of retained earnings of G$1,075 Mn. having grown by GYD $426.5 million in profit after dividend in 2024. This represents profits retained in the business to finance capital injection.

Conclusion

CNOOC may not have the flair of Exxon or the drama of HESS but in its own quiet and discreet way its performance matches its American counterparts in another bumper year with its hosts Guyana – or rather its leaders – mesmerised into paralysis and content to do nothing. 

See this coming Friday for the overall picture.

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 159 – June 6,  2025

Exxon’s 2024 Financial Statements

1. Overview

Earlier this week ExxonMobil Guyana Limited (EMGL) summoned the Guyana press to the launch of its2024 Annual Report. Two conditions: only questions on the financial statements would be entertained and the number of questions strictly restricted. Like one of its junior partners Hess, the results for 2024 are staggering, and its profitability measures more that double the Exxon group as a whole. Guyana’s Stabroek Block now joins Kohinoor (India circa 1300) and the Cullinan (South Africa 1905) to create an imperial trinity of exploitation of plunder acquired under unequal terms, adorned as triumph and defended by the exploiter and the exploited.

Unusually for a branch or what is called an External Company incorporated in The Bahamas, Exxon publishes a glossy annual report with more photographs than our own public companies. It presents a glowing picture of economic transformation and partnership with the people and the Government of Guyana. However, beneath the positive narrative, the report glosses over – or buries – critical details about the tax treatment under the 2016 Petroleum Agreement, including the government’s controversial obligation to pay Exxon’s taxes.

One cannot help but describe Exxon’s statements as a deliberate web of deception – as they have been since the overstating of pre-2016 costs. The Business Service Manager announced a 60% increase in revenue while the actual figures show 56%, a result of how far they will go to conceal the fact that they do not pay taxes – Guyana pays it on their behalf. The difference between the 56% shown above and the 60% announced is as a result of adding the tax shown as deducted – which they do not pay – to the revenue which in 2023 was shown as “includes] non-customer revenue related to Article 15.4 of the Agreement”. SHAME on the Company, SHAME on the Government and SHAME on our accounting profession which never calls them out.

As a percentage Production cost has remained at 4% of revenue, Exploration cost 1% of Revenue, Lease Interest 3% and Royalty 2%. The big cost is Depreciation and Amortisation of $301,849 Mn which makes up 17% of Revenue.  

One titillating statistic: Exxon’s total comprehensive income for the year – after accounting for taxes which the Government pays – is close one and a quarter trillion dollars. It took Guyana fifty-nine years before its budget reached one trillion dollars. Exxon earns in income for its foreign shareholders substantially more in less than ten years.

Thank you Trotman, thank you Jagdeo and thank you Ali!

The Balance Sheet

The Balance Sheet is sometimes called the Statement of Affairs or Statement of Net worth or simply Statement of Assets and Liabilities. The table below is a (slightly) summarised restatement of the audited financial statements. The figures are stated in Guyana Dollars but for convenience, the table is prepared in millions of Guyana Dollars.

 

Highlights

Expenditure on Wells and Production facilities accounts for $605,000 Mn, of which a significant portion comes out of Work in Progress. Deferred and Trade Receivable has increased by 90% and requires some explanation. Deferred Receivable represents amount due from Joint Venture Partners from cash calls and also non-customer revenue which is probably the amount it expects to receive from the Government of Guyana to meet its tax obligations. An amount that will be cleared in four months’ time is hardly a deferred receivable but that is how flexible and creative Exxon is.  

What is even more astounding is the amount of $352,681 Mn. described as amounts due from the Home Office to fund Petroleum Operations. The average amount due from the Home Office over the year is just short of $400,000 Mn. That’s an embarrassment of wealth.

What makes this situation even more incredible, is that in 2024, this 45% interest in the Stabroek Block – our Stabroek Block – earned Exxon’s 45% interest a whopping $1,255,300 Mn, or $1.2 Trillion. That is more than 150% that Guyana is likely to earn by way of income through the Consolidated Fund.

The tax mystery

The mysterious tax arrangement is causing all kinds of contortion and deception among the oil companies. Here is a comparison of the note on tax charge in 2024 compared with 2023.

2024

2023

Note 7 – INCOME TAX EXPENSE Income Tax Expense is recognised in respect of taxable profit calculated on the basis of the income tax laws of Guyana that have been enacted as of the date of these financial statements.

Note 7 – INCOME TAX EXPENSE Under Article 15.2 of the Petroleum Agreement, the Branch is subject to the Income Tax Laws of Guyana with respect to filing returns, assessment of tax, and keeping of records. Under Article 15.4 of the Petroleum Agreement, the sum equivalent to the tax assessed on the Branch will be paid by the Minister responsible for Petroleum to the Commissioner General, Guyana Revenue Authority and is reported as non-customer revenue.

Conclusion

ExxonMobil is the first Branch entity that produces an Annual Report. It is shiny, designed to present an image of corporate responsibility and national partnership. That is a trap. Exxon knows how to play gullible politicians like those they have met in Guyana. In the Coalition, they met amateurs, dazzled by oil, eager to please and out of their depth. In the PPP, they confuse the bright ones out of renegotiation, ring-fencing, an independent Petroleum Commission and into insider dealings, fears and cowardice. Exxon did not need to change its strategy. Just the faces across the table.

Every Man, Woman and Child Must Become Oil-Minded Part 158

Introduction

On May 17, 2025, the National Assembly passed the Oil Pollution Prevention, Preparedness, Response, and Responsibility Bill on a voice vote. The bill’s thirty-seven clauses and three schedules were considered en bloc, meaning that no clause-by-clause examination was conducted. One wonders whether the Speaker or the Mover of the bill wanted to avoid a critical analysis of the Bill’s provisions.

It may be coincidental that the architects have incorporated the ubiquitous PPP into the title. In any case, a Bill should be judged not by its title or acronyms, however unique, but by its contents. On that basis, when evaluated against international standards, this law collapses under its own inadequacies. In coming to this conclusion, I assessed the Bill against ten criteria drawn from international best practice, including the experience of countries like the United States, Canada, and Norway, as well as the principles set out in global instruments such as the IMO’s Oil Pollution Preparedness and Response Convention (1990). These criteria are not academic – they reflect solid, real-life experience.

Each has been forged in the crucible of real oil spills, corporate denials, and costly public clean-ups. They cover the core elements of effective legislation: scope, prevention, monitoring, financing, preparedness, liability, penalties, public participation, institutional design, and legal coherence. Although a senior Minister ruled out any input from me in the discussion on the Bill as “unhelpful”, what follows is not a partisan view – it is a professional assessment based on years of studying and writing on Oil and Gas.

Poor grade

The analysis reveals that the Guyana Bill falls short of meeting objective standards: it is non-compliant with eight of the ten standards, partially compliant with two, and fully compliant with none.

“Strong” = Fully or substantially compliant; “Moderate” = Partially compliant or significant compliance with notable gaps; “Weak” = non-compliant or largely deficient

Structural weaknesses

There is no definition for the critical term “petroleum operations” in the Bill. The term is defined in the 1986 Petroleum Exploration and Production Act, adopted in the 1999 Agreement, and defined differently in the 2021 Petroleum Activities Act. Littering the Bill with undefined, critical terms like pipelines, transportation systems, subcontractors – often the source of actual pollution – is not just poor drafting, but an open invitation for litigation. The “helpful input” from relevant industry experts is woefully lacking. And that is not one of the ten criteria!

While Clause 12 imposes a general duty to prevent pollution, it delegates sweeping regulatory powers to the Minister, without prescribing scope, principles, or limitations. Even more troubling, the Minister is authorised to amend all three Schedules to the Bill by negative resolution, which avoids parliamentary scrutiny. In the context of a largely dormant National Assembly, this backdoor lawmaking is inappropriate and dangerous. Further, the Bill defers critical technical standards to future regulations, effectively legislating in blank. And while it references substantial penalties, it is silent on enforcement architecture: no inspectors, timelines or triggers.

Notable absences

Despite its ambitions, the Bill stops short of establishing a proper licensing regime for oil spill preparedness and response. Instead, it requires only the approval of contingency plans — an administrative hurdle rather than a substantive regulatory gatekeeping mechanism. This means that an operator may legally function without ever being granted or held to a formal licence under this Act. Compounding this shortfall is the Bill’s treatment of financial responsibility. While it nominally requires responsible parties to maintain financial assurance, it defers the standard by allowing coverage only “as far as practicable.” This vague qualifier erodes the principle of strict liability. It opens the door to discretionary interpretations and potential evasions – a troubling prospect in a country exposed to high-risk petroleum operations and limited enforcement capacity.

On liability and obligations, the Bill makes any director, manager, or secretary personally liable only if the offence is proved to have been committed with their consent or connivance. These are high thresholds for a prosecutor to overcome. If the framers were serious about prevention, they could have made the more egregious cases strict liability offences, shifting the burden onto those responsible for compliance, rather than requiring the prosecution to prove mental elements like intent or collusion.

Monitoring obligations fare no better. Operators must report pollution as soon as it occurs (Clause 14). Responsible parties must submit an oil spill contingency plan to the CDC, and Clause 29 requires them to conduct periodic inspections following that plan. But notably, it is empowered to audit only the records, not to conduct a physical or other inspection.

To be continued

In the next column, we will examine the special case of ships, funding, the relevance of the 2016 Agreement and guaranties and indemnities.

Every Man, Woman and Child in Guyana Must Become Oil-Minded – Column 157

Introduction

Amid concerns about unresolved audit issues, mysterious tax certificates and controversial oil spill legislation, Hess Exploration Limited, a branch of a Hess subsidiary incorporated in the Cayman Islands, is the first of the Stabroek Block partners to lodge audited financial statements. The Cayman Islands company is a wholly owned subsidiary of Hess Corporation, incorporated in Delaware, USA, which is one of the most permissive jurisdictions in the United States.

Hess filed two sets of financial statements: Hess Guyana Exploration Limited, which operates the Stabroek Block as a subsidiary, and Hess Guyana (Block B) Exploration Limited, a subsidiary of a Bermuda-based company that holds a 20% interest in the Kaieteur Block. The separate external companies arrangement probably allows the two separate branches with similar names under the Guyana Companies Act. Another point of interest is that the financial statements of the Stabroek Block branch are stated in US Dollars, while those of the Kaieteur Block are stated in Guyana Dollars. Notwithstanding, both have the same Guyana auditors. The separate financial statements for this Block note that it was relinquished in 2023.  There is an additional anomaly that the financial statements for the Stabroek Block are expressed in United States Dollars, while those of the Canje Block are stated in Guyanese dollars.

The rest of this column examines the financial statements of Hess Guyana’s 30% participating interest in the Stabroek Block.  While the audited statements are stated in US$, we have converted these to Guyana Dollars.  All Tables sourced from the Branch’s financial statements.

Except for the tax borne by the Government being accounted for as non-customer revenue, revenue is derived from the sale of 40 million barrels of crude oil in 2024 (up from 19 million in 2023) to a marketing subsidiary of Hess Corporation. Revenue rose by 58%, from GY$738.03 billion in 2023 to GY$1,165.51 billion in 2024. Cost of sales as a percentage of revenue fell from 11% to 8%, while Depreciation, Depletion and Amortisation accounted for 15% in 2024, up slightly from 14% in 2023. Gross margin reached 77%, up from 75%. General and Administrative expenses remained steady at 1% of revenue. Due to rounding, Operating Income was GY$880.5 billion before financing costs of GY$3.16 billion, leaving Net Income before tax of GY$877.34 billion—an increase of GY$351.10 billion or 67% over 2023.

Here comes the quirk. The Statement shows a tax expense of exactly 25% of pre-tax income, explained by Hess in a manner both confounding and misleading. Article 15.4 of the 2016 Stabroek Agreement clearly states that the Government of Guyana, not the contractor, pays the income tax liability using the State’s share of profit oil. Yet Hess describes this as a portion of “gross production,” separate from cost oil and profit oil, being used to “satisfy” the tax. This is not only misleading, it is false. There is no third allocation. The tax is paid from the Government’s share, exactly as agreed.

This dishonest accounting narrative is not the doing of local auditors or management. It originates in documents filed with the U.S. Securities and Exchange Commission and passed down to Guyana. That makes it not just a local embarrassment but an international one.

The Balance Sheet

The Balance Sheet exhibited substantial asset growth, with total assets increasing by 35% to reach GY$1,791,314 Mn at year-end 2024, an increase of GY$465 billion from the prior year. Significant additions included the purchases of Liza Destiny and Prosperity FPSOs, as well as increases in material and supplies of over US$100 million in current inventory.  Receivables of $61,837 Mn were an increase of 17% over the previous year and represent amounts due from the sale of crude oil, all of which is sold to a related party.

Staggering returns

A key measure of financial performance is the return on capital, measured by income divided by average capital employed. Given that the profit before and after tax is the same (GY$ 877.34 billion), and the average of the 2023 and 2024 year-end equity figures is GY$1,280.714 million, the return on capital employed to Hess stands at a staggering 68.5%.

This means the company generated nearly 69 cents in operating profit for every dollar of equity capital deployed – an extraordinary return by global oil industry standards. Such a result confirms that HESS Guyana’s operations in the Stabroek Block are not only profitable, but exceptionally so, raising important questions about how much value is being retained by Guyana itself in this contractual relationship.

And this is the result. The Branch distributed to its head office – we are not sure which one – US$1,454,509,084! All for a 30% stake, and the extreme generosity of our politicians who accuse the nation of being “stupid” and “unable to understand.”