TORONTO – Energy analysts, Rystad Energy, today disclosed that the Government of Guyana’s average take of 60% from its offshore oil industry, places the country “right between major producer Brazil at 63% and fledgling producers Mozambique and Mauritania, at 57%.”
“We find the current fiscal regime in Guyana to be in line with other emerging oil and gas countries. As Guyana firms up its credentials as an attractive upstream destination, we expect that new awards of production sharing agreements will likely stipulate revised fiscal parametres, with the higher government take,” A Rystad report today quoted, Sonya Boodoo, Vice President of Upstream Research at Rystad Energy, as saying.
“The current fiscal regime for Stabroek involves a transparent profit-sharing contract with three main components: a 2% royalty, a profit oil level of 50%, and a cost recovery ceiling of 75%. The contract is reflective of the situation at the time of signing back in 1999, when multiple companies had encountered several dry exploration wells,” Rystad said.
Rystad Energy has benchmarked the Stabroek fiscal regime against the fiscal regimes of other “frontier” and upcoming oil and gas producing countries, such as Brazil, the United States (deepwater Gulf of Mexico), Mozambique, Israel, Tanzania, Mauritania, Suriname, and the Falkland Islands.
To measure the impact of the fiscal regimes in these countries, Rystad Energy has run its economic model analysis on the Liza Phase 1 project and compared the results against the fiscal regimes for the peer group countries. From there we derive the estimated government take under each country’s fiscal regime, calculating the split of profits between the E&P companies and the government.
According to Rystad, Government take is defined as the present value of the government take divided by the present value of the profit, where profit is revenue minus investments and operational costs.
The analysts maintained that at the time of ExxonMobil’s investment in Guyana. E&P companies were seen to be taking a considerable risk by conducting deepwater exploration in the region.
To make such frontier drilling attractive, Guyana offered competitive fiscal terms,” Boodoo said.
The firm emphasized that government take is defined as the present value of the government take divided by the present value of the profit, where profit is revenue minus investments and operational costs.
Between 2015 and 2019, oil and gas companies invested around $8.1 billion in exploration and development activities in Guyana’s offshore sector.
Rystad explained that under the country’s fiscal regime, these companies assume all risks during the exploration phase, which explains the negative free cash flow (FCF) seen thus far.
“Going forward, these costs – including both investments and operational expenses – will grow as new development projects are approved and new fields are brought on stream…at the peak, the annual costs are expected to reach around $8 billion,” Rystad Energy said.