As we discussed in our editorial “Oil Share” last Sunday, the consortium headed by ExxonMobil – Esso Exploration and Production Guyana Limited (EEPGL) – is moving at deliberate pace on the development of the Stabroek Oil Field, where they struck oil last May with their Lisa 1 well. ExxonMobil is the operator and holds a 45 per cent interest in the Block, Hess Guyana Exploration Ltd, 30 per cent, and the Chinese CNOOC Nexen 25 per cent interest. Subsequently, two other strikes confirmed the large petroleum reserves estimated to be at least 1.4 billion barrels and this November, as required by our law, our Government was “officially” informed of the oil discovery.However, even though a Production Sharing Agreement (PSA) was signed between EEPGL and the GoG, no specific details have been released by the latter on the fiscal regime, even though the resource is owned by the people of Guyana, on whose behalf the GoG is supposed to be striking the best bargain. Petroleum is an exhaustible resource and while EEPGL will be making large capital investments to develop the field, it behooves the Government to make the Guyanese people au fait with the financial details.Two days ago, EEPGL announced it had awarded contracts to a Dutch company, NV SBM Offshore to design a “floating production, storage and offloading (FPSO) vessel. What this means is that none of the oil extracted will reach the Guyana shore, 120 miles away, but will be processed, stored and transferred directly to oil tankers from the FPSO to be shipped to overseas markets. According to reports, ExxonMobil indicated the consortium will make its Financial Investment Decision (FID) by the end of 2017, and if this is positive, SBM will proceed with construction, installation and operation of the FPSO. ExxonMobil said that it expects to produce 100,000 barrels of oil per day from a new FPSO for our field. This would cost approximately US billion and take at least two to three years to be on location and ready to extract and process oil.The question on the minds of most Guyanese is how quickly will petroleum be flowing and how much revenue will be coming into the national Treasury – whether a Sovereign Wealth Fund (SWF) or the Consolidated Fund. Based on information posted on GoInvest’s website, unless the GoG has negotiated different terms with EEPGL, Guyana will be receiving “no less than 50 per cent of profit oil.” What this means is EEGPL will be allowed to recover all expenses incurred in exploration, operations and development – up to “a ceiling of seventy-five per cent of recoverable costs per month.” This is known as “cost oil” and will be deducted from the price at which the oil will be sold – to arrive at the “profit oil.”Everything will therefore depend on the price of oil, since as pointed out in our editorial “Oil Share” we have opted to forgo the example of Uganda which imposed a Royalty in addition to a 30 per cent income tax on profits. Royalty comes off “production oil” and would have guaranteed at least some income. Predicting oil prices is of course very treacherous since they are not governed by the normal supply and demand variables of the market. Recently we saw oil plunge from over US0/barrel to below US simply because US shale oil producers, backed by easy funding, were able to massively increase production at lower costs to face down Saudi production challenges.With the recent agreement by OPEC and some other producers to curtail production by 1.8 million barrels per day, prices are expected to firm up – but not too much since shale oil will most likely pick up the slack with President-elect Donald Trump’s blessings. Using a price of US/bl and expecting EEPGL to utilise its 75 per cent maximum costs, US/bl will remain for “profit oil.” The “minimum” 50 per cent of this that will accrue to us will be US.50/bl or US0,000 daily or US3,750,000 annually. What is the maximum the Government will negotiate for?