A Booming Oil Economy with Billion-Dollar Questions
Guyana has rapidly emerged as one of the most important oil frontiers in the world. Since ExxonMobil’s 2015 discovery of oil in the Stabroek Block—off the coast of the South American nation—the country’s fortunes have skyrocketed on paper. With over 11 billion barrels of recoverable oil now confirmed and daily production exceeding 600,000 barrels, Guyana stands to become one of the top oil producers per capita globally.
But beneath this boom lies a contract that critics say sells Guyana short, locks the country into unusually low returns, and could become one of the most lopsided oil agreements in modern history.
The Deal: A 2% Royalty That Defies Industry Norms
At the heart of the controversy is the 2016 Production Sharing Agreement (PSA) signed between Guyana and a consortium led by ExxonMobil, along with Hess Corporation and China’s CNOOC. Under this agreement:
- Guyana receives a 2% royalty on gross revenues
- The oil companies can recover up to 75% of production as “cost oil”
- The remaining “profit oil” is split 50/50, giving Guyana 12.5% of total revenues
- In total, Guyana receives approximately 14.5% of oil earnings, one of the lowest effective government takes in the world
By contrast, most oil-producing countries secure royalties between 10–15%, with some states achieving total revenue shares of 50% or more once taxes and fees are added.
Why So Low? Was It Risk or Inexperience?
When the deal was signed in 2016, Guyana had no proven track record in oil production. Some argue that the low royalty was the price of attracting early investment in a high-risk environment. But critics say that’s only part of the story.
The deal was reportedly signed without competitive bidding, limited public disclosure, and with minimal input from international energy or legal advisors. Guyana’s bargaining team—while patriotic—was outmatched in technical experience, and the contract locked the country into a long-term framework that cannot be unilaterally revised without Exxon’s consent.
Even more troubling, some provisions may allow Exxon to recover royalty costs, meaning Guyana could be paying itself from its own oil—effectively neutralizing even the modest 2%.
The Result: Massive Profits for Exxon, Modest Gains for Guyana
According to financial reports, ExxonMobil’s margins in Guyana are now comparable to major tech companies like Nvidia. In 2023 alone, the consortium earned billions of dollars, and revenue is projected to reach over US$150 billion over the life of the Stabroek Block.
Yet Guyana’s national oil fund—though growing—remains a small fraction of this wealth. Experts estimate the country will receive just 14.5 cents of every oil dollar, while the rest flows to Exxon and its partners.
Public Outcry and the Case for Investigation
As awareness of the deal spreads, so too does public anger. Civil society groups, opposition leaders, transparency advocates, and global watchdogs are calling for:
- A full, independent investigation into the circumstances under which the contract was signed
- Disclosure of who negotiated the terms, what advice was sought, and whether any conflicts of interest existed
- A legal review to assess whether the public trust was breached, intentionally or due to negligence
In the words of local economist Christopher Ram, “This was not a contract; it was a surrender.”
Too Little, Too Late? The New PSA Terms
Facing intense pressure, the Guyanese government has since updated its PSA model for all future oil blocks. The new framework includes:
- 10% royalty
- 10% corporate income tax
- A 65% cap on cost recovery
- A more balanced 50/50 profit oil split
These terms are now in line with international best practices. However, they do not apply to the original ExxonMobil contract, which governs over 90% of Guyana’s current oil production. That deal remains locked in until at least 2040.
What Exxon and Government Officials Say
ExxonMobil has defended the deal, stating that the consortium took early risks when no one else would, and that Guyana is now benefiting from infrastructure, jobs, and revenue that didn’t exist before.
The Guyanese government, for its part, has promised greater transparency going forward but insists that renegotiation is “not possible” without Exxon’s cooperation. So far, the company has shown no interest in adjusting terms.
Conclusion: A Nation Rich in Oil, but Starved of Returns
Guyana’s discovery of oil should have marked the beginning of broad-based prosperity, fiscal independence, and sustainable national development. Instead, it’s shaping up to be a cautionary tale of what happens when inexperience meets corporate power.
The original Exxon deal—with its 2% royalty and high cost-recovery terms—has effectively outsourced Guyana’s future to a foreign-led consortium. While oil production booms, the country’s actual share of the wealth remains alarmingly small.
The time for passive acceptance is over. Whether through legal, political, or diplomatic means, Guyana must explore its options—because the stakes are too high to ignore.
