(MENAFN-Caribbean News Global)
By Kemol King
GEORGETOWN, Guyana, (DPI) – Guyana expects a tsunami of revenue inflows into its Natural Resources Fund (NRF), over the next four years, amounting to twice the size of its $552.9 billion budget for 2022. .
The projections are captured in the 2022 budget, which was recently tabled in the National Assembly by the Chief Minister in the President’s Office for Finance, Dr. Ashni Singh.
Guyana projects revenues of $957,874,800 in 2022, $1,165,443,900 in 2023, $1,335,315,100 in 2024 and $1,781,842,700 in 2025. royalties and interest, amount to 5,240,476,500 USD. In Guyanese currency, this equates to nearly $1.1 trillion.
It can be hard for the average person to figure out how much money that is. The 2025 entries alone nearly eclipse Guyana’s 2021 budget.
Where will all this money come from?
Guyana currently has a Production Sharing Agreement (PSA) with ExxonMobil and its Stabroek block partners, Hess Corporation and CNOOC Limited. It establishes a system of sharing the oil produced between the parties and a royalty levied by the government, which functions as a tax on the price of each barrel of oil produced and sold.
During a five-hour lecture on Wednesday, Dr Singh outlined the operations in the coming years that will be the source of Guyana’s oil revenue.
“The Stabroek block currently has three identified production areas – Liza 1, Liza 2 and Payara. The production capacity is currently 120,000 [barrels per day] bpd with the Liza Destiny [floating production, storage and offloading vessel] FPSO in operation.
Production of Operation Liza Phase One has been ongoing since December 2019 and has earned Guyana US$607 million over the past two years.
Production had been reduced by an equipment malfunction leading to flaring. A resolution of the issue by ExxonMobil and plans to increase the capacity of the Liza Destiny could see higher production levels in the future and a likelihood of increased revenue.
Dr Singh said: “The commissioning of the Liza Unity FPSO in early 2022 will increase capacity to 340,000 bpd…”
This FPSO arrived in the Stabroek block late last year and has the potential to nearly triple Guyana’s current production, with corresponding increases in revenue. This is why Guyana expects to earn more money in 2022 than it has earned in the past two years from oil production.
“The deployment of the Prosperity FPSO in 2024 will further increase capacity to 560,000 bpd,” noted the Minister of Finance.
These three vessels represent all the production operations approved by Guyana. ExxonMobil has asked Guyana to approve a fourth operation, Yellowtail, which would have a nameplate capacity of 250,000 bpd.
“With the fourth production area planned, Yellowtail, estimates are expected to reach 810,000 bpd by 2026/2027 and additional developments under consideration could see us reach 6 FPSOs producing one million bpd by 2030.”
This is consistent with public statements made by ExxonMobil and its partners regarding their production plans for the Stabroek block, which contains more than 10 billion barrels of oil equivalent. There is so much oil that ExxonMobil sees the potential of up to 10 FPSOs operating at the same time to develop reserves, which means that a million bpd could be only half the production rate that Guyana could achieve if ExxonMobil goes ahead with such aggressive production targets.
What does this mean for Guyana?
President Dr Mohamed Irfaan Ali, in his pre-budget speech on Tuesday, said the oil and gas industry must be leveraged to achieve the goal of strengthening all sectors.
“We have made it clear that revenues from the oil and gas sector must be used to make other sectors more competitive, must be able to and must be used in ways that broaden our country’s economic framework, improve our competitiveness, improve our sustainability. , to build an economy that stands on many different legs, that can withstand global shocks, that can weather storms when they come.
Over the years, starting in 2022, a portion of Guyana’s oil revenues will be used to fund urgent development initiatives related to health, education, infrastructure and other critical sectors, which will elevate Guyana to developed country status under the President’s broader low-carbon development agenda. Strategy, ensuring a good standard of living for all Guyanese.
This can be achieved with projects like gas-to-power which will halve the cost of electricity; transportation infrastructure such as the upcoming four-lane highways and the new Demerara River Bridge that will increase connectivity and reduce traffic congestion; sustainable hospitals with the best-trained medical staff to provide world-class health care at little or no cost; and free education at Guyana’s premier public institution of higher learning, the University of Guyana.
This is what is possible for Guyana, with careful management of Guyana’s oil revenues. Overall, the provisions of the Natural Resources Fund Act 2021 establish a transparent and robust framework for this purpose, which makes parliamentary oversight the cornerstone of its management.
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