The People’s Progressive Party/Civic (PPP/C) Government has made its first withdrawal from the Natural Resource Fund (NRF), with US$200 million being withdrawn in accordance with parliamentary approval being granted as part of the Budget 2022 process.
In a statement from the Ministry of Finance, Senior Finance Minister Dr Ashni Singh announced that the first draw down was made in keeping with the NRF Act 2021. Pursuant to Section 16 of the NRF Act 2021, US$200 million (or GY$41.7 billion) has been transferred from the NRF to the Consolidated Fund. According to the Ministry, this is to finance national development priorities.
“This transfer was made in accordance with the strengthened legal architecture of the NRF Act 2021 and follows the publication in the Official Gazette of all petroleum revenues paid into the Natural Resource Fund during the period 1 January to 31 March 2022.”
“The NRF Act 2021 which came into operation on the 1 January 2022, represents a significant improvement in transparency and accountability and the overall management of the natural resources wealth of Guyana for present and future generations,” the Ministry said.
It has always been known that Budget 2022 would be the first budget to be financed partly by Guyana’s oil revenues, to make it Guyana’s first withdrawal from the NRF since the country started collecting oil revenues in early 2020. At the time, parliamentary approval was granted for a total of US$607.6 million to be transferred during the fiscal year 2022.
While the withdrawal rule restricts withdrawals from the Fund to deposits made in the previous fiscal year, the first schedule of the Natural Resource Fund Act 2021 allows an exception in the first year, giving the Government the latitude to withdraw the total balance in the Fund at once. The Ministry of Finance had said that such a withdrawal is pertinent to address Guyana’s pressing development needs.
The NRF has already received inflows for at least 10 oil lifts since ExxonMobil started production in the Liza 1 Development, as well as interest earned. It had been announced that the fund had a $150 billion closing balance at the end of March 2022.
The Bank of Guyana had released the first-quarter report on the NRF back in April. In it, it is explained that the fund had a starting balance of $90.9 billion at the start of the 2021 fourth quarter and a balance of $150 billion at the end of the 2022 first quarter.
The Bank also revealed that Guyana is expected to earn millions from 12 crude lifts planned for this year. These lifts, each of which amounts to 1 million barrels of crude, will presumably come from both the Liza 1 and 2 Developments.
Guyana, with US oil giant ExxonMobil as the operator, began producing oil on December 20, 2019, in the Stabroek Block. The first-ever payment of US$54.9 million for an oil lift was received in February 2020.
Since Exxon found crude in commercial quantities offshore in 2015, there have been 28 oil finds to date in the Stabroek Block and an estimated recoverable resource of over 10 billion oil-equivalent barrels.
United States oil giant, ExxonMobil is currently undertaking four production projects – Liza 1, Liza 2, Payara and Yellowtail in the oil-rich block. Production capacity is currently at 120,000 barrels per day (bpd) with the Liza Destiny FPSO in operation.
Meanwhile production only recently started in the Liza 2 Development, which is said to produce even lighter crude than Liza 1. It is also estimated that with the Yellowtail Development project on stream, production will climb to 810,000 bpd by 2027. The US oil major anticipates at least six FPSOs producing 1 million bpd by 2030.
The oil rich Stabroek Block is 6.6 million acres (26,800 square kilometres). Exxon, through its local affiliate Esso Exploration and Production Guyana Ltd (EEPGL), is the operator and holds 45 per cent interest in the block. Hess Guyana Exploration Ltd holds 30 per cent interest, and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds the remaining 25 per cent interest.
