Exxon Sparks IMF Concern With Weighty Returns in Tiny #Guyana - Bloomberg
Exxon Mobil Corp. got such a “favorable” deal from Guyana, home to the biggest new deepwater oil play, that the tiny South American country should rewrite its tax laws, the International Monetary Fund said.
While Guyana should honor the existing deal, future contracts should ensure the state gets a higher portion of crude proceeds, the fund said in a report seen by Bloomberg News. The country, 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.
Terms of the 2016 contract “are relatively favorable to investors by international standards,” the IMF said in a report prepared for Guyanese officials. “Existing production sharing agreements appear to enjoy royalty rates well below of what is observed internationally.”
Open Oil, a Berlin-based company that advocates contract transparency, also found Guyana’s share of the #Stabroek was low compared with both established and early-stage producing countries. Guyana will receive 52 percent of positive cash flow over the life of Exxon’s initial project, compared with between 63 percent and 72 percent for developments in Liberia, Mauritania, Ghana, Senegal and Papua New Guinea, it said in a March report.
The Exxon contract, which was published on a government website last year, provides Guyana with a 2 percent royalty on sales and 50 percent of profitable oil, once costs are repaid. Exxon and its partners can only deduct three-quarters of their costs each year, giving the government some cash in the first years of the project.