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Energy research firm predicts Guyana will retain 60% of oil profits

Published:Wednesday | May 30, 2018 | 12:00 AM
David Granger, president of Guyana.

The Norwegian oil and gas research firm Rystad Energy is predicting that Guyana's oil sector could generate annual revenue of US$15 billion and that the government would pocket most of the profit generated from the explorations.

"ExxonMobil's discovery of the Liza field in 2015 truly put Guyana on the global energy map," said Espen Erlingsen, head of upstream research at Rystad Energy.

"We predict Guyana's total oil production to surpass 600,000 barrels per day by the end of the next decade. These volumes could generate total annual revenue of US$15 billion from the oil and gas industry. After all costs are paid, around US$10 billion of profit could thus be split between the companies and the government," Erlingsen said.

Under the current fiscal regime, the government would collect its share through a two per cent royalty and a 50 per cent levy on oil profits.

Rystad Energy estimates that this will give Guyana 60 per cent of the profit from the various projects, while the remaining 40 per cent will go to international explorations and production (E&P) companies. The firm's analysis of other frontier countries that only recently opened up for E&P - such as the Falkland Islands, Israel, Mozambique and Mauritania - is that the government take has been in the range of 50 to 65 per cent.

"In order to attract investments from international E&P companies to kick-start their offshore ambitions, frontier countries often need to sweeten the pot with favourable fiscal terms. Guyana has followed this pattern," said Erlingsen.

"In retrospect, one can argue that the government has succeeded in generating the activity they were hoping for," he said.

Referencing an International Monetary Fund report that the deal granted to ExxonMobil to develop the giant Liza field was overly "favourable", Erlingsen suggested that the Guyanese government consider rewriting its tax law.

"The question going forward will be whether the Guyanese govern-ment - emboldened by its stunning exploration success over the past three years - will elect to alter its fiscal regime when future licences are awarded."