Report on Petroleum Production and

Revenues

January 2020

Ministry of Finance
March, 2020
 RPPR Jan 2020

About this report

On December 20, 2019, Guyana became an oil producing nation. In anticipation of first
oil, the Government of the Cooperative Republic of Guyana (GCRG) established, in
January 2019, a sovereign wealth fund (SWF), known as the Natural Resource Fund
(NRF), for the management of petroleum revenues. Following the rules set out in the NRF
Act 2019 can help to safeguard against the resource curse1, as well as ensure that
petroleum revenues benefit both current and future generations. In establishing the NRF,
GCRG committed to managing the Fund according to the principles of good governance
including transparency, and accountability, and international best practices including the
Santiago Principles.2 To ensure transparency and accountability, the NRF Act 2019
requires several reports on the NRF to be published, including, but not limited to:

1) Reports from the Public Accountability and Oversight Committee, Macroeconomic

Committee and Investment Committee;
2) Reports on withdrawals from the NRF, to be included in the annual budget proposal
and, if needed, in a Supplementary Appropriation Bill;
3) Annual reports of the NRF, including audited financial statements;
4) Quarterly reports and financial statements of the NRF; and
5) Monthly reports of the NRF.

These reports will allow the public to monitor deposits in, and withdrawals from, the NRF
so as to ensure that petroleum revenues are being managed according to the provisions
of the NRF Act 2019. However, these reports may not contain sufficient information to
allow one to determine how government revenues that are deposited into the NRF are
calculated. As such, the Report on Petroleum Production and Revenues (RPPR) serves to
bridge this gap by providing regular updates on petroleum production and revenues. The
regular publication of the RPPR will allow for greater transparency in this new sector of
the economy, ensuring that the public is fully aware of the amount of petroleum being
produced and revenues being generated. Such transparency is important, given the
magnitude of revenues that will be generated from this resource.

1 The resource curse refers to the phenomenon where countries with an abundance of natural resources tend to have
less economic growth, less democracy, and worse development outcomes.
2 The Santiago Principles were written by a group of 26 SWFs in 2008 to define a practical and appropriate governance

and accountability framework for sovereign wealth funds. By becoming an associate member of the International
Forum of Sovereign Wealth Funds, GCRG has committed to adhering to and implementing these 24 Generally Accepted
Principles and Practices. More information on these principles can be found at www.ifswf.org.

Mar 2020 i
 RPPR Jan 2020

Disclaimer

This report is a publication of the Ministry of Finance. However, the data on which it is
based is sourced from various reports provided to GCRG by ExxonMobil. As such, the
Ministry of Finance does not take responsibility for any errors or omissions included in
the reports provided to GCRG.3 All reasonable efforts will be taken to verify the accuracy
of the data contained in this report ahead of publication. Given the timelines stipulated
in the Petroleum Agreement for the Stabroek Block for the submission of reports to
GCRG, and the need to verify data ahead of publication, it is anticipated that the RPPR
for a given month will be published within sixty days of the end of that month.

The figures in the RPPR are subject to review and any updates to the data will be
highlighted in subsequent reports. All barrels reported are rounded to the nearest barrel
and prices to the nearest US cent. Any discrepancies due to rounding will be highlighted
in the report.

Abbreviations

BBL barrels
BOPD barrels of oil per day
CONTR Contractor
FPSO floating production, storage and offloading
GCRG Government of the Cooperative Republic of Guyana
GOVT government
IFO Intermediate Fuel Oil
MGO Marine Gas Oil
RPPR Report on Petroleum Production and Revenues
NRF Natural Resource Fund
PALO production after losses and operations
SWF sovereign wealth fund

3Further details on these operator reports for the Stabroek Block, including the timing of their submission can be found
in Annex C of the Petroleum Agreement for the Stabroek Block.

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 RPPR Jan 2020

Production

The production of oil from the Stabroek Block was reported to be 1,745,930 BBL for
January 2020, or 56,320 BOPD (see Table 1).

Of the 1,745,930 BBL produced, a total of 1,020 BBL was used for facility fill. As noted
in RPPR Dec 2019, as a result of the first lift of crude oil in January 2020, this volume of
crude will remain in the hose and piping between cargo tanks and the crude offloading
hose point that connects to the offloading vessel.4 There was no change in the volume of
crude used as ballast in the cargo tanks.5 Additionally, there were no operational losses
reported for this period and no crude was used for fuel or transportation in petroleum
operations.

The production after losses and operations (PALO) during January 2020 was 1,744,910
BBL, i.e. 1,745,930 – 1,020. This was the volume available to be lifted in January 2020.

Table 1: Crude Production from Liza Destiny in BBL.

Nov 2019 Dec 2019 Jan 2020

(a) Production from reservoir net of injection 0 427,282 1,745,930
(b) Less facility fill 0 3,202 1,020
(c) Less operational losses 0 0 0
(d) Less cargo tanks minimum operating volume 0 282,000 0
(e) Production after losses and operations (PALO) 0 142,081 1,744,910
Note: (a) – (b) – (c) – (d) = (e) but due to rounding there is a one-unit discrepancy in the summation
and the total reported in Dec 2019.

4 A lift
refers to the transfer of crude from the FPSO facility to an oil tanker. There are various hosing and piping between
the cargo tanks of the two vessels, which, after the first lift, will remain filled with 1,020 BBL of crude.
5 This is the minimum quantity of crude required to maintain stability of the FPSO facility.

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 RPPR Jan 2020

Sales and Entitlement

During January 2020, there was one cargo lifted from Liza Destiny, by ExxonMobil,
which amounted to 1,046,897 BBL (see Table 2).6 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.

Table 2: Crude sales and entitlements from Liza Destiny in BBL.

Nov 2019 Dec 2019 Jan 2020

CONTR GOVT CONTR GOVT CONTR GOVT
Inventory at beginning of
0 21,592 163,673
period
Production after losses and
0 142,081 1,744,910
operations (PALO)
Cost oil ceiling 0 N/A 0 N/A 1,308,682 N/A

Cost oil 0 N/A 0 N/A 1,025,305 N/A

Profit oil 0 0 71,040 71,040 359,802 359,802

Lifting Entitlement 0 0 71,040 92,633 1,385,108 359,802

Cargo lifted 0 0 0 0 1,046,897 0

(Over)/Under Lift for month 0 0 71,040 92,633 338,211 359,802

Cumulative (Over)/Under Lift 0 0 71,040 92,633 409,251 452,435

Inventory at end of period 0 163,673 861,686

Note: CONTR refers to the Contractor and GOVT to government. In December 2019, inventory at
beginning of period captures the hydrocarbons for commissioning activities. Due to rounding, there
may be some minor (1 unit) discrepancies in a few values reported in this table.

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 after losses and operations (PALO), can be allocated to permissible recoverable
costs incurred by the Contractor. In January 2020, this cost recovery ceiling amounted to
1,308,682 BBL, i.e. 75 percent of 1,744,910.7

6 It is expected that each lift from Liza Destiny will be approximately 1,000,000 BBL as this is the standard cargo size
agreed to by government and Contractor.
7 There is a one-unit discrepancy in this calculation due to rounding.

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 RPPR Jan 2020

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. This
two-step procedure for determining cost oil is illustrated in Figure 1.

Step 1: Cost Recovery Ceiling vs. Recoverable Costs (BBL)

PALO Estimated Cost

(1,744,910)
vs Recoverable Lower of = Recovery
*
75% Costs Ceiling

1,308,682 >> 1,308,682 1,308,682

Step 2: Cost Recovery Ceiling vs. Sales (BBL)

Cost
Recovery vs Sales Lower of = Cost oil
Ceiling

1,308,682 1,025,305 1,025,305

Figure 1: Cost oil determination

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. This determination is illustrated in Figure 2.

PALO

1,744,910

Cost Oil Profit Oil

(Contractor) (PALO – Cost Oil)

1,025,305 719,605

Contractor Government

359,802 359,802

Figure 2: Profit oil determination

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 RPPR Jan 2020

Since Government was not allocated any cargoes in January 2020, they 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.8

On the other hand, the Contractor9 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 month’s 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 percent royalty in cash, which
will be paid from the Contractor’s share of profit oil.10 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.

8 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.
9 In the Petroleum Agreement for Stabroek Block, Contractor refers to Esso Exploration and Production Guyana

Limited, CNOOC Nexen Petroleum Guyana Limited and Hess Guyana Exploration Limited and includes their
successors and permitted assignees.
10 As per Article 15.6 of the Petroleum Agreement for the Stabroek Block, the royalty cash payment for a calendar quarter

will be made to government 30 days after the end of that quarter and will amount to 2 percent of all petroleum produced
and sold, less quantities of crude used for fuel or transportation. In January 2020 no crude was used for fuel or
transportation.

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Transfers to the NRF

In January 2020, there were no transfers to the NRF since the Government lifted no
petroleum in January 2020; hence, there were no revenues due to them from their share
of profit oil (see Table 3). Additionally, there were no royalty payments due in January
2020 as no petroleum was produced and sold in the previous quarter.

However, since the Contractor lifted crude, Government is entitled to a royalty of 2

percent of all crude produced and sold in January 2020. As noted above, this amounts to
20,506 BBL of crude, which the Government has elected to receive in cash. The cash-
based value of the royalty will be determined using the average fair market price of a
barrel of crude for January 2020, calculated in accordance with Article 13 of the
Petroleum Agreement for the Stabroek Block.

At the time of publication, the Government and the Contractor were still finalising the
procedures to give effect to Article 13 of the Agreement. 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 BBL.11 Using this price, the value of the royalty for January 2020 would
be US$1,268,706.

However, while royalties are estimated on a monthly basis, Article 15.6 of the Petroleum
Agreement stipulates that the monies will be transferred to the Government quarterly,
thirty (30) days after the end of each calendar quarter. As such, the royalty payments for
January, February and March 2020 will be transferred to the NRF by April 30, 2020.12

Table 3: Government revenues from Liza Destiny.

Nov 2019 Dec 2019 Jan 2020

Government sales (BBL) 0 0 0
Revenue earned (USD) n/a n/a n/a
Date of transfer n/a n/a n/a
Royalty due (BBL) 0 0 20,506
Average fair market price for crude (USD per BBL) 0 0 61.87*
Royalty cash value (USD) 0 0 1,268,706
Date of transfer n/a n/a 30/04/2020
Balance in NRF at end of month (USD) 0 0 0
Deposits (USD) 0 0 0
Withdrawals (USD) 0 0 0
Returns from investments (USD) n/a n/a n/a
*Estimated based on current draft procedure to give effect to Article 13

11Upon finalization, details of the procedure to give effect to Article 13 will be included in a separate report.
12As noted in the RPPR for December 2019, there was no petroleum produced and sold during this first month of
production so no royalties payable to Government for this quarter.

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