Wednesday, January 20, 2021

Guyana to rake in US$1.2M in royalty from first Exxon lift

The royalty payment for January from the Liza-1 well operations in the offshore Stabroek Block will see Guyana getting around US$1.2 million as ExxonMobil and its partners lifted some 1,025,305 barrels of crude, according to the Ministry of Finance’s calculations.
Royalties are paid quarterly and the sum for the first 2020 quarter will be made available and deposited into the Natural Resource Fund sometime later this month.
However, the Ministry of Finance has released its January monthly report on petroleum production and revenue pegging this country’s revenue for the period assessed at US$1.2 million.
The ministry said that at the time of publication of the report, the government and the contractor were still finalising the procedures to give effect to Article 13 of the Agreement, which deals with royalties.
“However, based on the current draft of the procedure, the average fair market price of crude for January 2020 would be US$61.87 per barrel (BBL). Using this price, the value of the royalty for January 2020 would be US$1,268,706,” the January Report on Petroleum Production and Revenues (RPPR), released yesterday, states.
The Ministry of Finance previously announced that it would publish the bi-monthly RPPR to give clear insight into oil produced and revenue derived for each calendar month.
As per Article 15.6 of the Petroleum Agreement for the Stabroek Block, the report states, the royalty cash payment for a calendar quarter will be made to government 30 days after the end of that quarter. According to Article 11.2 of the Petroleum Agreement for the Stabroek Block, in any month during which crude is produced and sold, a maximum of 75 percent of crude produced net of losses and operations, can be allocated to permissible recoverable costs incurred by the Contractor. This volume of crude is referred to as cost oil. The remaining crude is referred to as profit oil and is to be split equally between the Contractor and government.
It is expected that each lift from Liza Destiny will be approximately 1,000,000 BBL as agreed to by government and Exxon and its partners. Since cargoes are lifted 1,000,000 BBL at a time in any given month there will be some parties that have lifted more than their entitlement and some that have lifted less. Entitlements are reconciled with actual lifts in the (Over)/Under Lift account and brought forward to the next month.
The report notes that the production of oil from the Stabroek Block was reported to be 1,745,930 BBL for January 2020, or 56,320 BOPD [barrels of oil per day]. Of the 1,745,930 BBL produced, a total of 1,020 BBL was used for facility fill.
Additionally, there were no operational losses reported for this period and no crude was used for fuel or transportation in petroleum operations.
Giving a breakdown of sales and entitlement, it explains, “During January 2020, there was one cargo lifted from Liza Destiny, by ExxonMobil, which amounted to 1,046,897 BBL. This lift included the 21,592 BBL of Marine Gas Oil and Intermediate Fuel Oil that was loaded onto the Liza Destiny in Singapore for commissioning activities (see RPPR Dec 2019). The remaining 1,025,305 BBL of crude lifted in January 2020, i.e. 1,046,897 – 21,592, was produced from the Liza field,” the report stated.
It also explains that in January, their cost recovery ceiling amounted to 1,308,682 BBL or 75 per cent of 1,744,910.
“Given that recoverable costs are far in excess of the cost recovery ceiling for January 2020, all 1,025,305 BBL produced and sold from the Liza field was allocated to cost oil,” the report states.
“The 719,605 BBL of PALO remaining after the allocation to cost oil, i.e. 1,744,910 –1,025,305, is referred to as profit oil, of which the government is entitled to 50 percent, or 359,802 BBL,” it adds. Since government was not allocated any cargoes in January 2020, it would have under lifted 359,802 BBL during that month, which, when combined with the previous month’s under lift of 92,633 BBL, gives a cumulative under lift of 452,435 BBL at the end of January, the report explains.
On the other hand, it says, “the Contractor lifted one cargo in January 2020, but was still under lifted by 338,211 BBL, i.e. 1,025,305 + 359,802 – 1,046,897. When combined with the previous months under lift of 71,040 BBL, the Contractor, cumulatively, under lifted 409,251 BBL at the end of January 2020. As noted previously, Government has elected to receive its 2 per cent royalty in cash, which will be paid from the Contractor’s share of profit oil. The royalty due to Government for January 2020 will be based on 2 percent of the volume produced and sold in that month, which is 20,506 BBL, i.e. 2 percent of 1,025,305. This amount will be valued in accordance with Article 13 of the Petroleum Agreement for the Stabroek Block,” the report states.
The December RPPR report stated that production of oil was 427,282 BBL for December 2019, or 35,607 BOPD.
“Of the 427,282 BBL produced, a total of 3,202 BBL were used for facility fill, which includes the oil that remains in the various piping before the cargo tanks. It is estimated that an additional 1,020 BBL will remain in the hose and piping between cargo tanks and the offloading hose point at the completion of the first lift. A further 282,000 BBL of oil produced in December 2019 was used for ballast in the cargo tanks. These operational volumes will remain on the FPSO facility and in the piping until production from Liza Destiny has ceased,” the report said.
There were no operational losses reported for this period.
The PALO during December 2019 was 142,081 while the total volume of crude on the Liza Destiny facility at the end of December 2019 was 448,875.
During December 2019, no oil was lifted from Liza Destiny since the volume available for lifting, 163,673 BBL, was less than the standard cargo size of 1,000,000 BBL.
And since no petroleum was sold in December 2019, all petroleum produced in that month was allocated to profit oil, of which the government will be entitled to half.

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