Exxon & partners to walk away with tax-free US$8.7B profit in 2022
– Guyana to get less than US1$B on profit, royalty
Kaieteur News – Guyana is no doubt the crown jewel of Hess Corporation’s global asset portfolio. With just a 30 percent working interest in the Stabroek Block, the American company is set to collect US$2.6B in tax-free revenue for 2022.
Hess Corporation’s CEO, John Hess
Specifically, Hess Corporation’s CEO, John Hess was pleased to make this revelation during his participation at the Bernstein’s 38th Annual Strategic Decisions Conference. During an almost one-hour discussion that was focused mostly on Guyana, he said the company received three lifts of one million barrels of oil from the Stabroek Block, which has two ongoing projects, Liza Phase One and Liza Phase Two.
In the second quarter, he said the lifts will increase to seven and in the third and fourth quarters, eight liftings each. The Hess Boss said, “We have over a US$100 barrel price. We are therefore going from US$300M of incremental cash flow from Guyana to US$700M in the second quarter, then US$800M in the third and US$800M in the fourth. So that is a rate of change just for this year. So people used to say in the past ‘Why invest in Hess, just wait for the production to come on in Guyana’. Well guess what? It is on. And then that continues to compound at US$1B a year in incremental cash flow as each ship comes on.”
Hess disclosed that the third ship for the Payara development comes on stream in 2023 with the Yellowtail project coming into production two years later. He said a fifth ship will get sanctioned for 2026. “So this is our rate of change ahead and that is why it (Guyana) is such an incredible cash flow story and it is unequaled in the business.”
With two Floating Production Storage and Operating (FPSO) vessels in production this year, Senior Minister with responsibility for Finance, Dr. Ashni Singh had said during the reading of budget 2022 that there will be 94 lifts from the Stabroek Block, 13 of which will be Government lifts. From this, it is estimated that deposits into the Natural Resource Fund for 2022 will total US$957.6 million, comprising some US$857.1 million earned from the Government lifts of profit oil, and an additional US$100.5 million from royalties.
By Kaieteur News’ calculations, Exxon’s subsidiary and operator of the Stabroek Block, Esso Exploration and Production Guyana Limited (EEPGL) is poised to walk away with US$3.9B and while CNOOC will get US$2.2B this year. It therefore means that Exxon and partners will walk away with tax-free US$8.7B profit in 2022. Meanwhile, Guyana must pay the company’s share of income taxes for 2022 from its projected US$957.6 million revenue. Projects for the Stabroek Block continue to be sanctioned at breakneck speed as the companies intend to take advantage of the absence of ring-fencing provisions in the 2016 Production Sharing Agreement (PSA). Hess and its co-venture partners currently have four sanctioned developments on the Stabroek Block. The Liza Phase 1 development, which began production in December 2019 utilizing the Liza Destiny floating production, storage and offloading vessel (FPSO) with a production capacity of approximately 120,000 gross barrels of oil per day, recently completed production optimization work that expanded its production capacity to more than 140,000 gross barrels of oil per day.
The Liza Phase 2 development, utilizing the Liza Unity FPSO, began production in February 2022 and is expected to reach its production capacity of approximately 220,000 gross barrels of oil per day by the third quarter. The third development at Payara is ahead of schedule and now expected to come online in late 2023, utilizing the Prosperity FPSO with a production capacity of approximately 220,000 gross barrels of oil per day.
The fourth development, Yellowtail, is expected to come online in 2025, utilizing the ONE GUYANA FPSO with a production capacity of approximately 250,000 gross barrels of oil per day. At least six FPSOs with a production capacity of more than 1 million gross barrels of oil per day are expected to be online on the Stabroek Block in 2027, with the potential for up to 10 FPSOs to develop gross discovered recoverable resources. Guyana’s Stabroek Block is 6.6 million acres (26,800 square kilometers). ExxonMobil affiliate Esso Exploration and Production Guyana Limited is the operator and holds 45% interest in the Block. Hess Guyana Exploration Ltd. holds 30% interest, and CNOOC Petroleum Guyana Limited holds 25% interest.