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Road to First Oil – Every Man Woman and Child Must Become Oil – Minded Column No. 197 August 30, 2026
From 12.5% to Nearly 40% – How Long Can the Good Times Last? – Part 3
Having promised renegotiation and abandoned it on taking office, President Ali offered the country a substitute. The 2016 Agreement would stand, but it would be properly administered. He argued that as leader of a country governed by the rule of law, he was bound by the legal axiom of sanctity of contract. What he offered instead was that the whole of the operations would be thoroughly scrutinised, the finances of the oil companies subject to strict audits, and the national interest protected by good management. That was the bargain put to Guyanese in place of the one they were promised. Parts I and II asked how much Guyana receives from Stabroek and how long the present position can hold. This part asks what becomes of the money once it arrives. Six years on that bargain can be tested, and the last fortnight has tested it.
On 18 August, at a press conference at the Office of the President, Ali announced that Guyana’s share of Stabroek Block oil had risen from 12.5% to 39.8% because the cost bank had been recovered two years early. He described the earlier position in these words: “In terms of barrels, 75% of every hundred barrels produced went to cost recovery.” Seven days later the Ministry of Natural Resources published in the pro-Government Guyana Times a letter headed “Guyana’s profit oil share has always been 50%”, which clarified that the 39.8% “is our share of every single barrel produced, before costs are taken out.”
The letter, which bore no signature, disingenuously sought to blame the politician Sharma Solomon for causing confusion. In fact, it was correcting the President, who was as careless as he was uninformed. But the Ministry was not much better. Take its statement that the 75% cap only “limits how fast [costs] can be repaid”. It does nothing of the sort. It is the ceiling on costs which may be claimed in any one year, or put another way, the floor beneath profit oil in that year. Whether the contractors reached that ceiling in any given year, and therefore whether 75 barrels in every hundred did go to cost recovery, is a question of fact which neither the President nor his Ministry has answered, because neither has ever published the figures.
What these show is a President who does not understand the Agreement and a Ministry which cannot state correctly what the cost recovery ceiling does or how the ministerial audit works. There has been neither renegotiation nor administration, and there is confusion besides. Better contract administration was less a policy than an excuse by an administration which knew its own limitations and chose to proceed regardless, asking no help of anyone. Whether either can be trusted with the Agreement is a separate question, and this column comes to it.
Let us look at another promise made and not kept, one that could have prevented or mitigated some of the dangers we are now facing. That is the Petroleum Commission. In April 2017 the APNU+AFC tabled a Bill in the National Assembly; it was referred to a Select Committee and died with the No Confidence Motion. The PPP/C came to office promising a Commission, and Mr Jagdeo committed to it explicitly and publicly at the consultation on the Local Content Bill on 13 December 2021. In 2026 there is no Bill, no draft and no timetable.
Cost audits, technical compliance and environmental monitoring are only the regulatory part of what such a body would do. Properly constituted, it would be reading the market and putting informed advice before the Minister. Recruiting outside the Public Service is what buys – engineers, cost auditors and lawyers the State cannot otherwise hold, testing production data against the operator’s own, examining cost claims as they are made rather than years later, and keeping the memory a Ministry loses at every change of government.
Instead, all of it rests with a Ministry answerable to the same Minister who deals with the companies obsequiously, and which has never troubled to master the mechanics of the Agreement or its own powers and duties under it.
Unlike its inability to honour commitments made, the Ali Administration is adept at borrowing and spending. Domestic public debt has climbed from G$264.6 billion in 2020 to a projected G$1,245.1 billion this year, and external debt from US$1.320 billion to a projected US$4.355 billion. One thing they understood – and acted on liberally – raising the borrowing ceilings. From G$150 billion prior to 2021 to G$1,500 billion in 2024, and the external ceiling from G$400 billion to G$1,500 billion. Ten times and nearly four, respectively.
Spending was a good companion. Capital expenditure was G$72 billion in 2020. The Public Sector Investment Programme for 2026 is G$779.6 billion, half the entire budget, and public spending between 2021 and 2025 came to some G$8.06 trillion. Savings moved in the opposition direction. The Natural Resource Fund Act 2021 allowed withdrawal of 100% of the first US$500 million of the previous year’s deposits, then 75%, 50%, 25% and 5% of each succeeding US$500 million, and 3% of anything above US$2.5 billion, so that the more the country earned the less of it could be spent. The Fiscal Enactments (Amendment) Act 2024 doubled the blocks to US$1 billion and raised the rates to 100%, 95%, 90%, 85% and 50%. On deposits of US$6 billion the old scale allowed US$1.38 billion out; the new one allows US$4.3 billion. Oh, and it has fixed the books in relation to the taxes paid for the oil companies.
Then there is the Contingencies Fund, which exists for genuinely urgent, unforeseen and unavoidable expenditure. The Constitution and the Fiscal Management and Accountability Act cap advances from it at two percent of the preceding year’s estimated expenditure. On a budget of G$1.558 trillion that two percent is now some G$30 billion. A ceiling written when the budget was a fraction of its present size has grown with it, and what was conceived as an emergency reserve is now a standing appropriation of thirty billion dollars a year, spent first and reported afterwards.
Receiving its largest revenue in history, the Ali Administration rewrote the rule requiring it to save and raised the limits on the amounts it can borrow – both in the same year! It is no longer a case of having money and spending it. It is having money, spending it, and borrowing besides.
Let me close this Part with a frightening thought. Many years ago, Distinguished Professor Clive Thomas put wastage and corruption at 20% of the Budget. I take that as a floor. Capital is now half the budget, and where infrastructure is paid for twice and lasts half as long, the loss on capital alone runs at a third or higher. On the basis of almost daily reports of corruption, the proliferation of discretionary expenditure, and Ali’s unwillingness to take it seriously, my own estimate is higher.
Now take the Professor’s figure and apply it to the G$8.06 trillion spent between 2021 and 2025. That is G$1.6 trillion lost – more than the whole of the 2026 Budget. Five years of waste and corruption would pay for a sixth year of government: every road, every hospital, every teacher and every pension. And nobody can tell us whether the true figure is higher or lower, because every institution that might have counted it is compromised, captive or non-functional.
To be continued
An Appeal to the Commissioners of the MV Barima Commission of Inquiry
Dear Commissioners,
Permit me first to congratulate you on your appointment and to thank you for accepting this important public responsibility.
You were sworn in on 30 July 2026 to inquire into one of the gravest peacetime tragedies in Guyana’s history. Nearly four weeks later, the families of those who died or remain missing, the survivors and the public have heard virtually nothing from the Commission itself about when or how it proposes to begin its work.
That silence is becoming a matter of concern.
I readily accept that a serious Commission requires time to organise itself, obtain advice, settle its procedures and prepare for hearings. But necessary preparation does not require public silence. You begin your work in difficult circumstances. Questions were raised at the outset about the process of appointment, the absence of consultation, the composition of the Commission and its Terms of Reference. Recent experience with another Commission appointed following a national tragedy has also contributed to public cynicism about whether Commissions of Inquiry provide the accountability their appointment appears to promise.
Your silence risks feeding that cynicism. More importantly, it adds to the uncertainty, pain and frustration of families and survivors who are entitled to look to you for answers. In the present vacuum, grieving families and survivors may be approached individually concerning financial assistance, compensation or settlement before they have had an organised opportunity to understand and protect their rights. Immediate assistance is welcome and may be desperately needed. But assistance is not compensation, and financial need should not become the occasion for obtaining premature settlements or the surrender of legal rights. Any attempt to do so should be discouraged.
I therefore respectfully call upon the Commission, without further delay, to address the families, survivors and the public; explain the delay since 30 July; publish a timetable for the commencement of its work and first public sitting; and state when its Rules of Procedure will be published and how affected persons may seek recognition, representation and participation in the Inquiry.
None of this requires the Commission to prejudge evidence or disclose confidential deliberations. It requires only that an independent public Commission account for how it proposes to discharge the public trust it has accepted.
Some matters requiring early attention
Before evidence begins, the Commission should publish Rules of Procedure dealing with public hearings, representation, disclosure, examination of witnesses, participation by families and survivors, the treatment of persons facing criminal charges and the procedure where adverse findings may be contemplated. Openness should be the rule; private hearings the exception.
Officers in charge of the vessel on that fateful night have been charged with murder. The pending criminal proceedings require careful handling. The accused retain the presumption of innocence, the privilege against self-incrimination and the right to a fair trial. At the same time, the Commission must be able to hear evidence from others which may bear upon their conduct. The fairness principles commonly associated with Lord Salmon — notice of allegations, disclosure of the substance of the case and a proper opportunity to respond — should inform the Commission’s procedures.
Nor should the criminal charges against members of the crew narrow the Inquiry. The public is entitled to know not merely what happened on 18 July, but how it came to happen. That requires examination of the Barima’s maintenance, inspection and certification; passenger and cargo controls; the manifest and the extraordinary discrepancy between the recorded and apparent number of persons aboard; and the responsibilities of the Transport and Harbours Department and other public authorities.
It must also examine the wider management of the ferry service. Other vessels had been acquired but had not been commissioned. Why not? Were they intended to replace or supplement the Barima? What decisions, delays or failures kept them out of service, and did that contribute to the continued use of the Barima? Were warnings ignored, known deficiencies tolerated or opportunities to prevent the tragedy missed?
The Inquiry must also examine what happened afterwards: rescue, recovery, identification and family liaison; the decisions concerning the raising of the vessel; and preservation of the evidence it may contain. Its proper field is what happened before, during and after the disaster.
No relevant person should be beyond its reach. Ministers, senior public servants, regulators, inspectors, engineers, passengers and others who possess relevant evidence should be called where necessary.
No office should confer immunity from legitimate inquiry.
The families and survivors
The families and survivors cannot be spectators at an inquiry into their own tragedy.
There are confirmed deaths, missing persons and survivors. There may have been passengers who never appeared on the manifest, and further remains may be discovered when the vessel is eventually raised. The Commission should provide a means by which those affected can participate and, where appropriate, be represented collectively on matters of common concern while preserving their individual legal rights.
Past experience gives particular reason for concern. Following previous public tragedies, Government and persons acting on its behalf have moved directly to affected families with offers of cash settlements, accompanied in some cases by agreements containing confidentiality or non-disclosure provisions. We should not pretend that the possibility of a similar approach does not exist here.
The Commission’s silence creates the very conditions in which that can happen. Families grieving, some still awaiting the recovery of loved ones, and many facing immediate financial pressures may be approached individually before they have received independent advice, organised themselves collectively or even heard from the Commission established to inquire into their loss. Once individual settlements begin, families can be divided, rights surrendered and the collective search for answers and accountability weakened. That, I submit, will be harmful to all concerned.
That is not a theoretical concern. It is another reason why the Commission must become publicly engaged now. Its proceedings cannot protect families from every pressure, nor is that its function. But an active, accessible and transparent Commission gives victims and families a forum, a voice and a process. An invisible Commission leaves a vacuum which others are free to fill.
Make the Commission your own
I make these observations with some experience of such proceedings, having appeared as counsel before the Commissions of Inquiry into the death of Dr. Walter Rodney and the Georgetown Prison fire. They taught me that the authority of a Commission ultimately depends less upon the Instrument appointing it than upon the independence, fairness and transparency with which it conducts its work.
Your Commission was appointed by the Executive. It must not be defined by the Executive. Publish your procedures. Set your timetable. Communicate with the families. Hold your hearings openly. Call every relevant witness regardless of office. Follow the evidence wherever it leads.
You have accepted a Commission of Inquiry. This historic duty is now yours to discharge. The first step is a simple one: emerge from the silence and tell the families, the survivors and the country what you are doing and how soon you will begin work.
I remain respectfully,
Christopher Ram
Attorney-at-Law
Chartered Accountant
August 27, 2026
Road to First Oil – Every Man Woman and Child Must Become Oil – Minded Column No. 196
From 12.5% to nearly 40% – How long can the good times last? Part II of II (but see note)
Part I welcomed President Irfaan Ali’s announcement that Guyana’s entitlement from the Stabroek Block production has risen from 12.5% to approximately 39.8%. That percentage reflects mainly the recovery of accumulated exploration and development costs: as less production is required as cost oil, more becomes profit oil. The value of Guyana’s increased share has been magnified by rising production and oil prices, driven in part by geopolitical events including the Russian invasion of Ukraine and, more recently, the closure of the Strait of Hormuz. Meanwhile, much of the Stabroek Block remains unexplored.
The Stabroek Block remains a developing petroleum province, with further exploration and development bringing new recoverable expenditure. New discoveries are of course welcome, but the expenditure is ultimately recovered from production. If costs rise sufficiently, more oil will be required for cost recovery, reducing profit oil and Guyana’s share. The movement from 12.5% to nearly 40% should therefore not be regarded as permanent.
ExxonMobil’s claim of force majeure over acreage affected by Venezuela’s territorial claim adds another dimension. Any extension of the exploration period postpones relinquishment and potentially allows additional exploration and development expenditure to enter the cost-recovery pool. Government should disclose the acreage and obligations affected, the period of any extension and its consequences for relinquishment. Time and acreage in Stabroek have considerable value and cannot be treated simply as matters between the Government and ExxonMobil – still less as matters for ExxonMobil alone.
The other major variable is oil price. Guyana is enjoying both a much larger share of production and sharply higher prices following the war involving the United States, Israel and Iran. At the illustrative US$90 used in Part I, Guyana’s 41.8%, including the 2% royalty, is worth US$37.62 per barrel. At US$70 the same percentage produces US$29.26 and at US$60, US$25.08. At current production levels, the difference quickly runs into billions of US dollars. The percentage has not changed, but the value of what Guyana receives certainly has.
The Bank of Guyana’s figures put the revenue surge in perspective, though they do not establish the 39.8% share. For the first six months of 2026, petroleum receipts into the Natural Resource Fund were approximately G$378 billion, compared with G$224.7 billion for the same period in 2025 – a rise of about 68%. Profit-oil receipts rose by approximately 76%. These remarkable numbers reinforce the need for Government to publish the calculations and production data behind the announced 39.8%.
Peace in Ukraine and with Iran, whenever it comes, could remove a substantial part of the current price windfall. Equally, increased recoverable exploration and development expenditure could reduce Guyana’s percentage even if oil prices remain high. Guyana’s extraordinary fortune is that both variables are presently working in its favour: cost recovery has fallen substantially while oil prices have risen sharply. Neither can be assumed to continue indefinitely.
None of this results from any change in the 2016 Petroleum Agreement. The royalty remains 2%; profit oil continues to be divided equally; and the cost-recovery, tax and stabilisation provisions remain. What has changed is the economics of the Stabroek Block. Petroleum companies are entitled to returns commensurate with the risks they undertake, and exploration can undoubtedly result in enormous losses, but that argument carries considerably less weight today than it did in 2016.
The Stabroek Block today is a proven petroleum province with enormous resources already discovered multiple developments and exceptional production. Much of the early expenditure has been recovered, the risks have diminished considerably, yet the fiscal terms remain essentially those agreed in 2016. There is therefore no contradiction between welcoming Guyana’s greatly increased revenues and continuing to regard the Agreement as inequitable. A modest share of an enormously profitable enterprise can still produce a very large cheque; the size of the cheque does not establish the fairness of the bargain.
Part I demonstrated another aspect of that bargain. Even as Guyana’s profit-oil share rises, equal profit oil does not mean equal economic benefit because the contractors enjoy substantial tax advantages under the Agreement. The billions now flowing to Guyana are therefore evidence of the exceptional value of the Stabroek Block, not proof that the contractual division of that value was fair or reasonable.
Under pressure from the independent press, especially Kaieteur News, President Ali repeated the announcement earlier made by ExxonMobil Chairman Darren Woods. Having repeated the figure, he should substantiate it after confirmation from Woods and the Ministry of Natural Resources. Guyanese should be told whether the 39.8% includes the 2% royalty, the current balance of unrecovered cost, expected exploration and development expenditure, and the projections for cost oil and profit oil over the next several years. We should also know whether the 39.8% is expected to rise, remain broadly stable or decline as additional expenditure enters the accounts.
This is not information of merely commercial interest or reserved for specialists. Petroleum revenues are now central to the national finances and the percentage of production accruing to Guyana affects present revenues, future budgets and the resources available to succeeding generations. Parliament and the public therefore have a legitimate interest not merely in the headline percentage announced by ExxonMobil and repeated by the President, but in the figures, assumptions and projections behind it. Transparency requires more than announcing good news; it requires providing the information by which that news can be understood and independently assessed.
Guyanese are understandably frustrated by the obstinate refusal of President Ali and Vice President Jagdeo to entertain even the mildest suggestion that they invoke the renegotiation provisions of the 2016 Agreement, as they had promised to do. Having secured the electorate’s trust partly on that promise, they abandoned it on taking office. The hypocrisy is obvious, but it goes further: it is a betrayal of the electorate and – to use Jagdeo’s own words – a selling out of the national interest.
Note: The scale of the increase in oil revenues raises issues which go well beyond the 2016 Agreement. I have therefore decided to add a Part III – this coming Friday – examining the danger of this explosion in oil revenues becoming a licence for more waste, uncontrolled corruption and destructive economic management.
Carl Singh-led Constitution Reform Commission is already a colossal failure with no reasonable prospect of redemption
Dear Editor,
The appearance in the press on August 15 of a notice dated June 23, 2026, signed by Attorney-at-Law Javed Shadick, Secretary to the Constitution Reform Commission, is the first public indication in some time that the Carl Singh-led Commission is still alive and, after more than two years in office, has finally reached the first stage of public consultation.
The notice invites written proposals until December 31, after which comes the second stage – public engagements. More remarkable than the timetable is that the matters on which submissions are invited are substantially a wholesale transposition of the mandate Parliament gave the Commission in Act No. 16 of 2022. This means that nearly four years after the Act and more than two years after the Commission was sworn in, it has arrived at the starting point Parliament prescribed for it.
This is not a snail’s pace. The snail, at least, keeps moving towards its destination.
There is a ready benchmark for judging this performance, and it is one which the present Commission itself invited. Ms. Gail Teixeira, now Vice-Chair of the Commission, told the National Assembly in 2022 that “repeating what happened in 1999 is the model that has been most progressive and most innovative not only in Guyana but in the entire region.” Very well. Let us make the comparison.
The 1999 Constitution Reform Commission was born out of the political crisis following the 1997 elections and the Herdmanston Accord. Its circumstances were difficult: it was the first wholesale examination of the justifiably derided 1980 Constitution; its issues were contentious; and its timetable demanding. Yet, sworn in in January 1999, the Commission considered some 4,600 proposals drawn from oral and written submissions, public hearings, organisations and individuals across the country, including substantial proposals from the PPP/C and PNCR. It drew on Guyanese and international expert advice, deliberated and reported by July, making 171 recommendations.
In roughly six months, under far greater political pressure and under the chairmanship of Mr. Ralph Ramkarran, S.C., the 1999 Commission substantially completed an exercise which the Carl Singh-led Commission, after more than two years, has barely begun.
Attorney General Anil Nandlall – never short of words – was emphatic during the debate on the legislation. He described the Commission as “time-bound and assignment-bound” and said it would have the institutional support to operate “effectively and efficiently”. Most appropriately, he told the National Assembly that the people must hold accountable those who make promises and do not deliver.
Let us apply his test.
This is not a resource-starved exercise. Hundreds of millions of public funds have been allocated to constitutional reform and its supporting machinery. I understand that the monthly payment to the Chairman is $1.3 million, the Vice Chair $500,000, each Commissioner $200,000, and the Secretary $600,000. Farcically, egregiously and unconscionably, Commission members accepted payment for each of the four months that the Commission went into recess for the 2025 elections campaign. And when it was meeting, things were hardly better: Chairman Singh himself acknowledged publicly in September 2025 that attendance by Commissioners had been a problem. Knowingly accepting public money for work one does not perform strikes me as conduct of an altogether different order from mere absenteeism.
Incredibly, the Commission and its members are entitled to the same privileges and immunities as the National Assembly and its members. Is this Government serious, or has the entire National Assembly taken leave of its senses? In any case, these privileges cannot convert non-performance into public service or unearned remuneration into value for money.
The Commission is expressly charged with considering the safeguarding of public funds and integrity in public life. It can start with itself. Every member should therefore have no difficulty confirming that the appropriate taxes have been paid on the remuneration received.
Nor is the Commission short of personnel, experience or political clout. Its twenty-one members include five Government nominees, all Ministers when appointed and already remunerated from the public purse, among them Vice-Chair Gail Teixeira and Attorney General Anil Nandlall, S.C.; four Opposition nominees; attorneys Timothy Jonas, S.C. and Kamal Ramkarran; and private-sector representative Ramesh Persaud.
Responsibility for the Commission’s dismal performance is therefore collective. It is inconceivable that these politicians, professionals and businesspeople would tolerate such delay, cost and paucity of output if their money was being spent.
There is an even more fundamental problem with the Commission’s composition. The 2025 elections swept away the political configuration on which it was constituted. Nigel Hughes, to his credit, resigned when the AFC disappeared from Parliament. Yet, the representative from the Joinder parties – ANUG, Liberty Justice Party and The New Movement – none of which is represented in the National Assembly post – 2025 remains on the Commission while WIN, with sixteen seats and now the principal Opposition party, has no representative at all.
The Attorney General himself recognised the problem. In October 2025, Mr. Nandlall acknowledged that the Act had been drafted for the previous parliamentary configuration and said that amendments had already been made to a draft Bill to reflect the new Opposition arrangement. Yet the Commission is now proceeding with public consultation without that acknowledged defect having been corrected.
The absurdity does not end there. Whatever recommendations the Commission eventually produces must enter the parliamentary process. WIN now holds sixteen of the twenty-nine Opposition seats. The Commission is therefore attempting to devise constitutional reform without the principal Opposition party, only eventually to send its proposals to a National Assembly in which that party’s support may be indispensable.
Measured against the time, resources and output, this performance amounts to gross incompetence.
While the Commission sits and waits more than four months for submissions – perhaps expecting the public to function at a pace similar to that of the Commission – the Attorney General and the Minister responsible for Finance should produce and publish a full accounting of expenditure and remuneration, while the Commission publishes its meetings and attendance, research undertaken and substantive work produced.
This Commission has had ample time to carry out a detailed assessment of the 1999 Report – including the submissions, the action taken on its recommendations, and the issues arising from their implementation or non-implementation. Where is its assessment of what was implemented, what was not, what worked, what failed and why? That should have been both its starting point and part of its invitation to the public.
Those who still hope for something useful from this exercise should remember that two genuine heavyweights – Haslyn Parris and Dr. Rupert Roopnaraine – were centrally involved in preparing the 1999 Report. But that was not all – and here I stand guilty of omissions. The Commission drew on constitutional experts including Justice Albert Sachs of South Africa, Professor Kathleen Mahoney of Canada, Anund Hylland of Norway, and our own Professor Keith Massiah, Professor Harold Lutchman and Professor Rudolph James. The question is what comparable intellectual firepower has the present Commission assembled?
Twenty-five years of experience have meanwhile supplied important issues requiring examination: the concentration of presidential power and presidential immunity; the failure to give meaningful effect to Article 13 and inclusionary democracy; constitutional appointment deadlocks, including at the apex of the judiciary; GECOM’s partisan architecture; parliamentary oversight; and genuine local government autonomy.
Guyana in 2026 is not Guyana in 1999. Petroleum wealth now raises fundamental constitutional questions about stewardship of natural resources, intergenerational equity and accountability for national wealth. Above all, constitutional reform must distinguish constitutional deficiency from constitutional non-compliance. There is little point endlessly rewriting the Constitution if governments and constitutional actors fail to observe the provisions already there.
Mr. Shadick’s advertisement has therefore performed one useful public service. It has told the country where the Commission stands in August 2026. Unfortunately, after more than two years, continuous remuneration and substantial public expenditure, it is scarcely beyond where Parliament placed it in November 2022.
Mr. Shadick himself also has some accounting to do. How does he discharge this important function as Secretary to the Commission alongside his appointment as Secretary to the presidential Commission of Inquiry into the MV Barima disaster?
And Mr. Nandlall needs no reminding. He himself told Parliament that those who make promises and do not deliver must be held accountable. That Guyanese may have forgotten the existence of the Commission about which he spoke so confidently is no excuse for its failure to account.
I am not usually a pessimist, but on the application of any reasonable test – including the Attorney General’s own metric – the Carl Singh-led Constitution Reform Commission is already a colossal failure. Nothing in its record so far suggests to me any reasonable prospect of redemption.
The question therefore is no longer whether this Commission needs more time. It is whether it should be permitted to continue in its present form. In my view, it should not. The present exercise should be ended and the task returned immediately to the constitutional Parliamentary Standing Committee for Constitutional Reform, where the political representation reflects the present National Assembly. That Committee can determine, transparently and with appropriate expert and civil-society participation, the arrangements for taking constitutional reform forward within a firm timetable and with proper accountability for public expenditure.
Yours faithfully,
Christopher Ram
From 12.5% to Nearly 40% – The Good News, and What It Means
Fri, August 21 2026, 2:01 AM GMT-4
Road to First Oil – Every Man, Woman and Child Must Become Oil Minded – Part 195
Part I of II
President Irfaan Ali brought Guyanese some genuinely good oil news this week. He announced that Guyana’s entitlement from production in the Stabroek Block has risen from the historical 12.5% to approximately 39.8%. Even if oil prices had remained unchanged, Guyana would now be receiving more than three times its earlier share. And because of the war on Iran, oil has risen more than 50% from its end-2025 price. That is great news and since I believe strongly in the old advice not to look a gift horse in the mouth, I welcome it.
This two-part column examines first what the increase means and how Guyana’s benefit compares with that of the oil companies. Part II will consider how durable this favourable position is, given today’s high oil price, prospective exploration expenditure and the unchanged terms of the 2016 Petroleum Agreement.
Let us be clear. The movement from 12.5% to nearly 40% is not the result of renegotiation. It follows from the Agreement’s cost-recovery mechanism. In the early years, up to 75% of petroleum could be allocated to recovering exploration and development costs. The remaining profit oil was divided equally, leaving Guyana with 12.5% of gross production. The logic is simple. As accumulated costs are recovered, cost oil falls, profit oil rises and Guyana’s share increases.
But first, this column notes an ambiguity over whether the 39.8% includes Guyana’s 2% royalty. The President’s own comparison points strongly to the royalty being additional. He compared today’s 39.8% with the original 12.5%, which was Guyana’s share of profit oil, not its total take including royalty. The natural reading is therefore profit oil against profit oil: 12.5% then and 39.8% now.
At an illustrative US$90 per barrel, 39.8% gives Guyana US$35.82 of profit oil. The 2% royalty adds US$1.80, producing US$37.62 per barrel, or 41.8% of gross value. If instead the 39.8% includes royalty, Guyana’s profit oil would be US$34.02, which with the US$1.80 royalty gives US$35.82. Either way, the improvement is substantial.
But nearly equal profit-oil shares do not mean equal economic benefits. The 2016 Agreement contains two major tax concessions to the contractors: the Government pays their corporation tax and provides the corresponding tax certificates, while distributions and remittances of profits are exempt from withholding tax.
The companies’ tax benefits
For illustration, I treat profit oil as taxable profit, apply corporation tax at 25%, and assume after-tax profit would otherwise attract 20% withholding tax, with no other adjustments. For every US$100 of profit oil, the corporation-tax benefit is therefore US$25. The remaining US$75 would attract US$15 withholding tax. On these assumptions, every US$100 of profit oil carries US$40 of tax benefits.
On what I consider the more likely interpretation; Guyana receives US$37.62 in profit oil and royalty. The companies receive US$35.82 of profit oil, plus an assumed US$8.96 corporation-tax benefit and US$5.37 withholding-tax benefit – a total economic benefit of US$50.15 per barrel. That is US$12.53, or approximately one-third, more than Guyana.
If the 39.8% includes royalty, Guyana receives US$35.82, while the companies receive US$34.02 of profit oil plus US$8.51 and US$5.10 in assumed tax benefits, giving them US$47.63. Again, their economic benefit is approximately one-third greater.
These figures are illustrative, not calculations of the companies’ actual tax returns or tax certificates. Taxable income can be affected by deductions and other adjustments. The purpose is to expose the structure of the bargain: equal profit oil does not mean equal economic benefit. Guyana receives a 2% royalty on top of its profit oil; the companies receive substantial tax benefits on top of theirs.
Cautionary tale
None of this diminishes the announcement. Moving from 12.5% to nearly 40% profit oil is excellent news. At present production and prices, the additional revenue is enormous. The cost-recovery mechanism that once restricted Guyana’s profit-oil share to 12.5% is now working strongly in our favour because enormous, accumulated costs have been recovered.
But today’s position reflects unusually favourable circumstances. Much of the earlier investment has been recovered, production is at record levels and oil is around US$90. Yet not a word of the 2016 Petroleum Agreement has changed. The 2% royalty remains; the tax concessions remain; the withholding-tax exemption remains; and the cost-recovery and stabilisation provisions remain. The economics have changed. The contract has not.
Nor are today’s economics guaranteed to continue. Oil was around US$61 at the end of 2025 and has risen sharply with the US/Israeli war on Iran. Prices can fall again. ExxonMobil and its partners also retain substantial exploration ambitions, and renewed exploration and development could generate another major cycle of recoverable expenditure, increasing cost oil and reducing Guyana’s profit-oil percentage.
Those issues belong in Part II. We should welcome the movement from 12.5% to nearly 40% for what it is: very good news for Guyana. But the next question is more difficult: how long can these favourable conditions last, and does receiving much more under the 2016 Agreement make the Agreement itself any less inequitable?
To be continued