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Contract transparency: Next steps for Guyana

Guyana, a small South American nation of less than 800,000 inhabitants, holds remarkable oil reserves. Recent discoveries looked certain to transform Guyana’s economy, and the IMF estimated a 52.8% growth in Guyana’s GDP in 2020. However, the recent oil price shock has the potential to disappoint the anticipated windfall and could alter Guyana’s prospects of becoming a leading oil producing nation.  

The first revenues from Guyana’s Stabroek Block have already flowed into government coffers, including USD 4.9 million in oil royalties transferred in May 2020. In February, one million barrels – valued at USD 55 million – were received from the sale of profit oil. This transaction took place just prior to the historical plunge in crude oil prices seen in the early part of this year.

In such a time, contract transparency and the disclosure of sales agreements become even more timely and urgent.

The big deal

In June 2016, ExxonMobil confirmed a world-class discovery in its Liza-2 well, located in the Stabroek Block approximately 200 kilometres offshore Guyana. This discovery is one of the largest crude oil finds in recent years worldwide.

Three days before the discovery was confirmed, a production sharing agreement (PSA) was signed between the government, ExxonMobil, CNOOC International and Hess, complementing the exploration agreement already signed between the parties. In December 2017, the government made the agreement publicly available in what was considered by its citizens to be a milestone in contract transparency.

A recent analysis by OpenOil on the contract suggests that “Guyana will receive up to USD 55 billion less than it should from the Stabroek license; an average of USD 1.3 billion per year.”  Responding to Open Oil’s report, Exxon highlighted that “the conclusions are misleading in that they compare Guyana deep water with mature hydrocarbon-producing provinces which naturally have evolved fiscal frameworks reflecting maturity and lower risk profiles.” The government claimed that the agreement was not purely about fiscal terms, but also about “geo-political and national security imperatives [that] could not be ignored.”

Production at the Stabroek block started in December 2019 and exports began in January. In the same month, the Department of Energy signed a sales agreement with Shell to sell the country’s first three consignments of profit oil received. By January, the first million barrels of oil were shipped. The price of the oil sold is however unknown, as the sales agreement has not been made publicly available.

Large oil traders remain interested in Guyana despite the price plunge. They are still submitting expressions of interest to be considered as marketing agents for the government’s share of the country’s crude. Publication of the sales agreement would be a step towards addressing several concerns raised by Guyanese in analysing the terms and conditions of petroleum contracts and oil sales agreements. The Department of Energy has committed to providing data on the sales. The Department of Energy also pointed out that there are certain areas in international oil sales negotiations that can be influenced by early disclosure of certain aspects of data on sales due to nature of commercial sensitivity in this type of business, which is no secret to those who operate within the international oil commerce arena.


The Stabroek block is located approximately 120 miles off the shore of Guyana. Image: Hess Corporation

Guyana’s oil contracts are publicly available

Contracts establish the rights, terms and obligations governing the exploration and exploitation of specific oil, gas and minerals reserves. Differences between contractual terms and the general tax legal framework relate mostly to fiscal provisions applicable during the life of a project. In many African countries, for example, tax incentives are generally granted through contracts rather than laws. Fiscal terms are a key piece in the puzzle for citizens to understand how much they are getting from the exploitation of their natural resources, and to monitor the compliance with the terms, obligations and payments arising from extractives projects in their countries.

In Guyana, the terms of oil contracts are a very important part of public debate. Transparency of these terms is therefore key. The Stabroek contract stipulates that the Government of Guyana will be granted a 50% split of profit from petroleum with the other parties receiving the remaining oil, with a cost recovery ceiling of 75%. This means that contractors could recover an amount of costs incurred to explore, develop and operate. A royalty of 2% on gross sales will be applicable. Other government revenue streams, including a signature bonus and surface rentals, are part of the government’s take according to the contract. Tax incentives including exemptions are also included.

The disclosure of the Stabroek contract is commendable. It enables public analysis of its terms, informing debate on the fiscal provisions of one of the most important oil deals in decades. Civil society organisations have been able to study the contractual stipulations and recommend amendments to the fiscal obligations stated in the contract. The move demonstrates that contract transparency is an emerging norm.

Disclosing sales agreements: the next step for Guyana?

Once the government receives its share of the country’s crude, it will look to sell this oil to traders via oil sales agreements. Data on these agreements is highly relevant for enabling oversight – including, for example, the identity of the buyer, committed annual and monthly oil volumes to be bought and sold, the price to be paid and mechanisms for price adjustment. Oil prices can have a significant impact on oil-dependent economies, and open data is crucial to monitor revenues and how they are spent. In times like these, when sharp declines in oil prices upend entire economies, the need for transparency is as salient as ever.  

While the contract governing the Stabroek block is public, the demands for more information persist, with citizens and media claiming that there is ample room to improve transparency of sales agreements.

In addition to disclosing contracts, the EITI Standard also encourages EITI implementing countries to disclose sales agreements related to sales of the state’s share of production or other revenues collected in kind. There is a clear opportunity for Guyana EITI to play a role in shedding light on this issue, through collaboration with the EITI International Secretariat and its work on commodity trading transparency. Guyana EITI received a commitment from the Department of Energy that the required data on oil production and trades will be provided for the preparation for the country’s second EITI Report.

Transparency on commodity trading agreements will enable the citizens of Guyana to hold companies and its government accountable as they execute important transactions that significantly impact public revenues. The government has taken an important step by setting up a Natural Resource Fund to better manage Guyana’s resource wealth.  Moving forward, ensuring that the country’s revenues are managed responsibly and sustainably should remain high on the political agenda. The country’s economic prosperity and the livelihood of its present and future citizens depend on it.

Background information

  • Guyana joined the EITI in October 2017. In doing so, the country committed to implement the transparency requirements of the EITI Standard, including the disclosure of all contracts and licenses granted or amended by 1st January 2021. This requirement is expected to further improve the management of mining, oil and gas sectors in resource-rich countries, and give citizens access to information on the deals governing these sectors.

  • The Stabroek Block is operated by Esso Exploration and Production Guyana Ltd. (an ExxonMobil affiliate), which hold a 45% interest. Hess Guyana Exploration Ltd. holds 30% interest and CNOOC Nexen Petroleum Guyana Limited holds a 25% interest.

  • For more information on Guyana EITI: gyeiti.org


Photo credit: Hess Corporation