US Senators Question Whether American Taxpayers Are Subsidizing ExxonMobil’s Guyana Operations

Three influential United States senators have launched a high-stakes investigation into ExxonMobil’s tax practices in Guyana, raising fundamental questions about whether American taxpayers are unknowingly subsidizing the oil giant’s lucrative operations in the world’s fastest-growing oil economy. The probe, initiated by Senators Sheldon Whitehouse, Chris Van Hollen, and Jeff Merkley, centers on a complex but potentially problematic arrangement: ExxonMobil may be claiming U.S. tax credits for taxes that the Guyana government pays on the company’s behalf, rather than taxes the company actually pays itself.

The crux of the matter is straightforward despite its technical complexity. Under Guyana’s 2016 Production Sharing Agreement (PSA) with ExxonMobil, the government pays the company’s local income taxes using revenue from oil sales. ExxonMobil may then be telling U.S. tax authorities, “We paid taxes in Guyana, so reduce our American tax bill accordingly.” The senators argue that this is fundamentally unfair – akin to receiving a discount on your U.S. taxes for taxes you never actually paid yourself. Their letter to ExxonMobil CEO Darren Woods, dated September 23, 2025, demands detailed explanations of how the company has handled these tax arrangements and their impact on its U.S. federal tax liability [1].

This controversy emerges against the backdrop of Guyana’s unprecedented economic transformation. Since oil production began in 2020, the country has experienced the world’s fastest GDP per capita growth, with a staggering 62.3% expansion in 2022 alone [2]. The discovery of approximately 11 billion barrels of oil reserves off Guyana’s coast has propelled the nation from one of South America’s poorest countries to a key player in global energy markets. ExxonMobil and its partners now extract around 900,000 barrels daily, with production expected to reach 1.5 million barrels per day in the coming years.

The 2016 Stabroek Block PSA contains the controversial provision at the heart of the senators’ inquiry. Article 15.4 stipulates that the Government of Guyana pays ExxonMobil’s income taxes from the government’s share of oil profits. This means ExxonMobil never writes a check for its Guyanese taxes – the government handles these payments directly. Under the broader PSA structure, ExxonMobil can recover 75% of oil revenues to cover operational costs, while the remaining 25% is split equally between the company and Guyana’s government. This arrangement effectively gives Guyana a 14.5% take of total revenues (12.5% profit share plus a 2% royalty).

The senators’ concern centers on U.S. tax law governing “dual capacity” taxpayers – companies that both pay taxes to foreign governments and receive specific economic benefits from those same governments, such as oil extraction rights. Under current regulations, specifically Regulation 1.901-2(a)(ii)(B), such companies can claim foreign tax credits to avoid double taxation on the same income. However, the law is clear that payments made to foreign governments in exchange for economic benefits should not qualify for these credits. The senators argue that when Guyana pays ExxonMobil’s taxes from oil revenue, these payments are more akin to subsidies than legitimate tax obligations.

Think of it this way: foreign tax credits exist to prevent unfair double taxation when companies genuinely pay taxes in multiple countries. But if your business partner pays your taxes for you using money from your joint venture, should you still get credit for paying those taxes? The senators clearly believe the answer is no, particularly when the arrangement involves a partnership with the China National Offshore Oil Corporation (CNOOC), a Chinese state-owned company.

The financial implications are substantial. Independent auditors report that ExxonMobil’s Guyana-related income tax expense was $660 million in 2023 and $1.2 billion in 2024. If the company has been claiming these amounts as U.S. foreign tax credits, it could be saving hundreds of millions of dollars annually on its American tax obligations. The senators have given ExxonMobil until October 23, 2025, to provide detailed responses to seven specific questions about its tax practices, including the legal justifications for any foreign tax credit claims and their impact on the company’s U.S. tax bill.

For Guyana’s business community and citizens, this investigation highlights long-standing concerns about the transparency and fairness of the 2016 PSA. While the oil boom has generated over $5.4 billion for the country’s Natural Resource Fund since production began, critics have consistently argued that the contract terms are overly generous to the oil companies [3]. The current arrangement, which was only made public after significant pressure on the government, has been described by some analysts as among the most favorable to oil companies in the region.

The senators’ probe also raises broader questions about international tax policy and resource extraction agreements. A 2024 U.S. Treasury Department proposal aimed at closing similar loopholes could save American taxpayers an estimated $71.5 billion over ten years. If implemented, such reforms would limit foreign tax credits to amounts equivalent to what non-dual capacity taxpayers would owe, thereby fundamentally altering the economics of international oil ventures and potentially influencing the structure of future production sharing agreements globally.

The timing of this investigation is particularly significant as ExxonMobil recently announced a final investment decision for its seventh offshore project in the Stabroek Block – the $6.8 billion Hammerhead development. This massive investment will further accelerate Guyana’s oil production capacity and economic growth trajectory. However, the tax controversy highlights the critical importance of transparency in how multinational corporations structure their operations to optimize global tax positions, particularly when these strategies may impact both U.S. and host country fiscal interests.

For ordinary Guyanese, the key question is whether their country is receiving a fair value from its oil wealth while potentially facilitating tax avoidance strategies that benefit foreign corporations and their home-country taxpayers. The investigation may also influence how other developing nations approach production sharing agreements with multinational oil companies, potentially setting new precedents for transparency and accountability in the global energy sector.

The outcome of this congressional inquiry could have far-reaching implications beyond the immediate parties involved. It may reshape international tax policy, influence future resource extraction negotiations, and determine whether one of the world’s most lucrative oil ventures has been structured in a way that unfairly benefits corporate interests at the expense of both American and Guyanese taxpayers. As Guyana continues its remarkable transformation into a major oil producer, the resolution of these tax questions will likely influence the country’s approach to managing its vast petroleum wealth for generations to come.

References

[1] Whitehouse, S., Van Hollen, C., & Merkley, J. (2025, September 23). Whitehouse, Van Hollen, Merkley Probe ExxonMobil’s Guyana Offshore Oil Contract and the Company’s U.S. Tax Liability. U.S. Senator Sheldon Whitehouse. https://www.whitehouse.senate.gov/news/release/whitehouse-van-hollen-merkley-probe-exxonmobils-guyana-offshore-oil-contract-and-the-companys-u-s-tax-liability/

[2] Ortiz-Ospina, E. (2024, October 15). Guyana’s oil-driven economy has had the largest GDP per capita growth in the world in recent years. Our World in Data. https://ourworldindata.org/data-insights/guyanas-oil-driven-economy-has-had-the-largest-gdp-per-capita-growth-in-the-world-in-recent-years

[3] ExxonMobil. (2024, November 13). 500 million barrels of oil produced from Guyana’s Stabroek Block. https://corporate.exxonmobil.com/locations/guyana/news-releases/11132024_500-million-barrels-of-oil-produced-from-guyanas-stabroek-block

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