The Pool, Not the Project: What President Ali Left Out of His Cost-Oil Math

The Pool, Not the Project: What President Ali Left Out of His Cost-Oil Math

By The 592 Guardian–Staff Writer August 2026

President Irfaan Ali told a news conference this week that Guyana is about to see a sharply larger share of Stabroek Block oil, now that ExxonMobil and its co-venturers have recovered close to their outstanding costs. He simplified the arithmetic for the public: instead of 75 barrels out of every 100 produced going to cost recovery, only 20 barrels would now be needed — leaving 80 to split, 39.8 for Guyana and 39.8 among the consortium.

The formula he cited — a 75% cost-oil ceiling, with the remainder split 50/50 as profit oil — is real. It is written into Article 11 of the 2016 Petroleum Agreement between the Government of Guyana and Esso Exploration and Production Guyana Limited, CNOOC Nexen Petroleum Guyana Limited, and Hess Guyana Exploration Limited. What Ali did not explain is that the same Article 11 he is relying on also explains why his numbers describe a moment, not a destination — and the contract text says so in language considerably more direct than his press conference did.

WHAT THE CONTRACT ACTUALLY ALLOWS

Article 11.2 of the Agreement sets the ceiling Ali referenced:

“All Recoverable Contract Costs incurred by the Contractor shall… be recovered from the value… of a volume of Crude Oil (‘Cost Oil’) and/or Natural Gas (‘Cost Gas’) produced and sold from the Contract Area and limited in any Month to an amount which equals seventy-five percent (75%) of the total production from the Contract Area for such Month.”

Two words in that clause do most of the work: “Contract Area.” Not “Field.” Not “Project.” The 75% ceiling — and by extension whatever percentage the consortium is currently drawing beneath that ceiling — is calculated against production from the entire Stabroek Block, treated as a single pool.

There is no clause anywhere in the Agreement that assigns a project’s costs to that project’s own output alone.

Article 11.6 removes any ambiguity on this point:

“The quantity of Cost Oil and/or Cost Gas actually utilized in satisfying the Recoverable Contract Costs may be allocated by the Contractor to production from any Field or Fields.”

This is the operative sentence for evaluating the President’s claim. The Agreement gives Esso — as operator — explicit discretion to recover costs from any field in the block, regardless of which field generated them. There is no ring-fencing. A dollar spent developing Uaru, Whiptail, or the incoming fifth FPSO does not sit in a separate account waiting on that project’s own production to pay it back. It is thrown into the same cost pool as Liza Phase 1 and Payara, and recovered against whatever oil the block produces that month.

WHY THIS MATTERS FOR THE “20 BARRELS” CLAIM

Ali’s framing implies a new steady state: cost recovery has dropped to roughly a fifth of production, and Guyana’s larger share is now the going rate. The contract’s own pooling mechanism says otherwise.

ExxonMobil’s Q2 2026 earnings disclosures put recovered costs at approximately US$55 billion — not the roughly US$40 billion, with US$5 billion outstanding, that the President’s figures implied. That gap alone is worth scrutiny. But even taking recovery as substantially complete, the pooled cost bank does not stay empty. The consortium is actively developing Uaru and Whiptail, and the fifth FPSO — arriving this month, according to Ali’s own remarks — carries its own capital costs. Under Article 11.6, every dollar of that new spending is eligible for recovery against total block production, the same pool that just drained toward zero.

Article 11.3 adds a second mechanism working in the same direction. Where Recoverable Contract Costs in a given month exceed the value of Cost Oil and Cost Gas available under the 75% ceiling, the shortfall does not disappear — it carries forward and is recovered from subsequent months’ production. A concentrated burst of commissioning or development spending, in other words, does not just raise the cost-oil share in the month it occurs; it can create a backlog that keeps pulling the percentage upward in the months that follow.

Neither mechanism was mentioned at the President’s news conference. Both are the direct and foreseeable consequence of a pooled, block-wide cost-recovery structure that the government itself signed.

THE OTHER OMISSION: ROYALTY

Ali’s 39.8/39.8 figure describes only the profit-oil split under Article 11.4, which is indeed 50/50 between the Minister and the Contractor. It leaves out Guyana’s 2% royalty on gross production, which is calculated separately and paid to government before cost recovery or profit-sharing even begins. That royalty is not cost-recoverable — a point the Guyana Revenue Authority itself has previously confirmed publicly. Guyana’s actual entitlement in any month is the royalty plus its half of profit oil, not the profit-oil split alone.

Presenting 39.8 barrels as the government’s full take understates what the state is contractually owed.

THE BOTTOM LINE

None of this makes President Ali’s underlying description of the formula false. The 75% ceiling exists. The 50/50 profit-oil split exists. What is missing from his account is the mechanism — written into the same Article 11 he is citing — that determines whether “20 barrels for costs” is a new floor or a temporary trough. The Agreement pools costs across the entire Contract Area and allows the operator to recover them against any field’s production, with unrecovered costs carried forward month to month. Sanctioned capital spending already in the pipeline — Uaru, Whiptail, and the fifth FPSO — will draw against that same pool.

The government is entitled to characterize a genuine improvement in Guyana’s near-term oil entitlement as good news. It is not entitled to present a pooled, fluctuating cost-recovery mechanism as though it were a permanent structural shift, when the contract’s own text says it is neither ring-fenced nor fixed.

For more on the agreement : https://petroleum.gov.gy/wp-content/uploads/2024/10/Petroleum-Agreement-Oct-7-2016_2.pdf

 Sources: 2016 Petroleum Agreement between the Government of the Cooperative Republic of Guyana and Esso Exploration and Production Guyana Limited, CNOOC Nexen Petroleum Guyana Limited, and Hess Guyana Exploration Limited, Article 11 (Cost Recovery and Production Sharing); ExxonMobil Q2 2026 earnings call remarks of CFO Neil Hansen; Guyana Revenue Authority public statements on royalty treatment.