…but stresses current contract should be honoured

THE International Monetary Fund (IMF) said ExxonMobil received such a favourable deal from Guyana that the country should rewrite its tax laws.

This is according to a Bloomberg article which called Guyana the home to the biggest new deepwater oil play. The article said that while Guyana should honour the existing deal, “future contracts should ensure the state gets a higher portion of crude proceeds…”
It said Guyana, “South America’s third poorest with an average per capita income of around $4,000, has little experience of dealing with multinational behemoths such as Exxon.”

In the article, the IMF described the terms of the ExxonMobil contract as relatively favourable to investors by international standards. It also said that the royalty rates included in the contract are well below what is observed internationally.

The article noted that IMF officials have visited Guyana multiple times over the past nine months as they help improve its legal, fiscal and regulatory frameworks before ExxonMobil and its joint venture partners, HESS and CNOOC Nexen.

It said too that Guyana has become one of Exxon’s five key global projects for the next decade “due to the sheer size of its oil endowment.”

The IMF recommends that Guyana employ a more progressive tax regime so that the government receives a higher share of profits as projects earn more; consider eliminating interest expenses from the project’s costs to avoid “abusive use of debt”; introduce tighter ring fences to avoid costs being shared around multiple fields and bulk up its regulatory capability.

Exxon’s total acreage in Guyana’s waters covers 11.5 million acres. ExxonMobil leads a partnership group that includes Hess Corp. and China’s CNOOC Nexen.
Petroleum production is slated to commence in March of 2020.