Crude oil production: royalty rates, profit-sharing, and accounting arrangements (Part I)

In our article of 15 May 2017, we referred to the announcement by ExxonMobil of “a world-class resource discovery of 1 billion oil-equivalent barrels” in Guyana’s waters. We noted that, while this is good news, there was no publicly available information as to the extent of oil revenues that will accrue to Guyana. The Government has since reported that it succeeded in negotiating a higher royalty rate from 1% to 2% on gross earnings. This is in addition to 50% of profits from the sale of all petroleum products by the oil company.

According to the Minister of Natural Resources, 75% of the revenue earned by ExxonMobil will be used to recover its investment, estimated at US$5 billion by the year 2020 when production is set to begin. The remaining 25% will be split equally, presumably after taking into account the cost of production, administrative, marketing and other related operational costs. In other words, Guyana will receive 12.5% of the net profit.  …to continue reading this article, please subscribe.  Already a subscriber ? Sign In

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