Exxon is doing quite well at Guyana’s expense

Dear Editor,

The financial media here in North America screams headlines like, “Exxon beats Wall Street profit targets with help from higher production”. Thanks to Guyana, Exxon did exceptionally well in 2025. The company reported its best production, nearly 5 million barrels/day, in 40 years. Guyana’s oil production was 875,000 gross barrels per day, a close second after the Permian with 1.6 million barrels.

So: what’s in there for Guyana as Exxon ramps up production surpassing 1 mm barrels/day in the coming years. Let’s refresh our basic understanding of the 2016 PSA formula for what Guyana could (not will) earn under ideal conditions:

Formula: Royalty + Profit oil − Tax paid for contractors (Guyana essentially pays itself the corporate tax from its own profit oil) − Effects of persistent cost recovery up to 75% cap.

Point #1: Fast ramp-up:

1. Speeds cost recovery;
2. Expands the dollar amount allowed under the 75% cap;
3. Keeps the cost pool large; and
4. Keeps Guyana near the 12.25% floor

Note that speeding up cost recovery is “bad” for Guyana in the short term as it leads to (a). It can be good long-term, but here’s the catch: with continual new spending, and no ring-fencing provision, the pooled costs stay large (c), and this will keep Guyana at the theoretical “floor” for a long, long time. The floor is a number less than 12.5% due to Guyana’s paying itself Exxon’s corporate tax from its share of profit oil).

Even so, 12.25% is theoretical, and not “money in the bank” (New York Federal Reserve). In fact, it is actually much less for a variety of reasons that accountants know all too well.

Point #2: In constant dollars (i.e., market oil prices divided by the U.S. consumer price index), and with a flat or sliding real oil price environment, Guyana’s real cash receipts fall as oil price falls, even with volumes soaring. So: Guyana’s oil money buys less and less in volume terms for imports, priced in U.S dollars. It’s like your Guyana dollar buying less and less at the market, every shopping day.

Point #3 and key takeaway: Oil production growth ≠ proportional Government of Guyana revenue growth.

Did someone say “Guyana is not awash in oil”? Reason enough for sound fiscal management for the day will soon come when all the bills for repairs and maintenance (for all that infrastructure), and for new investment, will come due, but there’s not enough, or zero balance, in the Natural Resource Fund. Contemporary examples: Nigeria, Venezuela, and Trinidad and Tobago.