Ratio contract outlines 50% profit oil, 1% royalty for Guyana

first_imgNew oil contract releasedA contract signed between an international oil firm and the Guyana Government has been released, which shows that Guyana has accepted royalty payment of one per cent and a 50/50 profit-sharing arrangement.The contract which was released on Wednesday is that of Israeli-based oil exploratory firm, Ratio Guyana Limited and Government that was signed on the April 28, 2015.Ratio Guyana commenced negotiations with the previous Government for a petroleum licence within the ultra-deep water Guyana Basin area in mid-2012. AtRatio Guyana Limited operates in the Kaieteur Blockthe time, that area was known as “Annex B”.Negotiations were nearly completed when the October 2013 Anadarko/Venezuelan incident occurred. It took until the first quarter of 2015 before negotiations resumed.On April 28, 2015, according to the Natural Resources Ministry, the production sharing agreement was signed by both the then Government of Guyana and Ratio’s principals. The concession was then renamed the “Kaieteur Block”, and totals approximately 13,535 square miles.Ratio Guyana is in a joint venture partnership with Esso Exploration and Production Guyana Limited (EEPGL), a subsidiary of US oil exploration giant ExxonMobil, in the Kaieteur Block, offshore Guyana.Ratio Guyana Limited has a 25 per cent stake in the Kaieteur Block. Ratio Energy Limited has another 25 per cent of the Kaieteur Block while EEPGL has a stake of 50 per cent.The Kaieteur Block is located to the North and adjacent to the Stabroek and Canje blocks, approximately 250 kilometres offshore in ultra-deep water, where a 3-D seismic survey is underway. The Ministry said the release of this contract is in keeping with its commitment to release major contracts between the Government of Guyana and companies in the extractive industries.Close to two weeks ago, the Government also released a contract signed on February 12, 2013 with Canadian-based company CGX Resources Inc (CGX Energy).The agreement with CGX energy stipulated a 53 per cent: 47 per cent profit sharing. Under the ‘Cost Recovery and Production Sharing’ heading of the contract, it was found that the Government will receive a 53 per cent profit after recoverable contract costs have been satisfied for either crude oil and natural gas. CGX currently holds an interest in three petroleum agreements – the Corentyne, Berbice and Demerara Blocks – covering approximately 3.3 million gross acres offshore and onshore Guyana. The petroleum agreements between the Government and ESSO Exploration and Production Guyana Limited, CNOOC NEXEN Petroleum Guyana Limited, Hess Guyana Exploration Limited, were also released. These agreements also provides for a 50 per cent profit sharing and a two per cent royalty.The first oil contract to be released was that between ExxonMobil in late December 2017. However, this contract was only released following heightened public pressure from the general public.When it was released, it was revealed that it contains clauses for the company to put aside millions for local content, and makes provisions for them to be granted sweeping tax concessions. The contract was signed in June 2017 between the coalition Government, ExxonMobil and its partners in the Stabroek Block. In Article 15 of the contract, Exxon is exempted from paying Corporation, Excise or Value Added Tax (VAT) on its earnings from petroleum.Article 15.4 also provides for the Government itself to pay the company’s Income Tax. To facilitate this, the oil company has to submit tax returns to the Government. Article 32 also stipulates that Government cannot modify the contract or increase any fiscal obligation the company has.In addition to that, information was leaked to the media that Government secretly received US$18 million as a signing bonus from ExxonMobil which was kept in a private account at Central Bank. Since the revelation of this secret signing bonus, the emerging sector has been mired in controversy. Government had failed to disclose this transaction to the nation, despite several officials, including Natural Resources Minister Raphael Trotman, being questioned about it by the media.last_img read more