Supply vessels docked at a Guyana Shore Base wharf, delivering materials for an ExxonMobil-operated oil platform in Guyana. (Luc Cohen/Reuters)
U.S. Senators Question ExxonMobil’s Tax Payments in Guyana Oil Venture — Foreign Tax Credits and Policy Loopholes
On September 23, 2025, three U.S. Senators — Sheldon Whitehouse, Chris Van Hollen, and Jeff Merkley — sent a formal letter to ExxonMobil CEO Darren Woods. Their concern: whether ExxonMobil may have benefited from a controversial arrangement in Guyana that allows the government to pay the company’s income taxes on its behalf, and if the oil giant then claimed those payments as foreign tax credits in the United States.
The issue is not just about ExxonMobil or Guyana. It touches on broader themes of international taxation, oil contracts, foreign subsidies, and the responsibility of multinational corporations. In this article, we will explore the background, the political inquiry, the potential loopholes in U.S. tax law, and what this controversy could mean for global energy economics.
Background: Guyana, the Stabroek Block, and Production Sharing Agreements
Guyana’s Oil Boom and Economic Transformation
Guyana, a small South American country, experienced an economic revolution after the discovery of massive oil reserves in the Stabroek Block, estimated at over 11 billion barrels. Production began in 2020, transforming Guyana from one of the region’s poorest nations into one of the fastest-growing economies.
But with prosperity came challenges. Critics argue that the Production Sharing Agreements (PSAs) signed with ExxonMobil and its partners may have left Guyana with limited revenue compared to the immense value of its natural resources. Central to this debate is how taxes are handled under the 2016 Stabroek PSA.
The 2016 Stabroek PSA and Article 15.4
Under the 2016 PSA between ExxonMobil, its partners (Hess and CNOOC), and the Government of Guyana, Article 15.4 specifies that the government will pay the companies’ income taxes from its share of “profit oil.” In practice, this means:
ExxonMobil does not pay income taxes directly to Guyana’s tax authority.
Instead, Guyana deducts the amount from its share of oil revenues.
The government issues ExxonMobil a tax receipt in the company’s name.
This system has raised two key concerns:
1. Is Guyana losing tax revenue by allowing Exxon’s taxes to be paid out of state resources?
2. Did ExxonMobil claim these tax receipts as U.S. foreign tax credits, thereby reducing its American tax liability?
If both are true, critics argue that U.S. taxpayers may be indirectly subsidizing ExxonMobil’s overseas operations.
Senators’ Concerns and the Seven Questions Raised
U.S. Tax Law and the “Dual Capacity Taxpayer” Rule
Under U.S. tax law, a dual capacity taxpayer is a company that both pays taxes to a foreign government and receives an economic benefit (such as royalties or special concessions) from that same government.
The law restricts how much of those payments can be claimed as foreign tax credits in the U.S. If a payment is not a genuine tax but rather a substitute for royalties or other financial benefits, it should not qualify for a credit.
Senators Whitehouse, Van Hollen, and Merkley argue that Guyana’s system of paying ExxonMobil’s taxes may fall into this gray area. If ExxonMobil is receiving a tax receipt without actually bearing the cost, then claiming it as a U.S. tax credit could be inappropriate.
The Seven Questions to ExxonMobil
In their letter, the Senators asked ExxonMobil to provide detailed answers by October 23, 2025. Among the key questions:
1. Has ExxonMobil filed income tax returns in Guyana under Article 15.4, and for which years?
2. Did the Government of Guyana pay Exxon’s income taxes in 2023 and 2024?
3. How much of these payments were claimed as U.S. foreign tax credits?
4. What specific U.S. tax laws and methods were used to justify those credits?
5. How much did these credits reduce ExxonMobil’s U.S. tax liability?
6. How does Exxon distinguish between taxes and economic benefits in the PSA?
7. Why was CNOOC, a Chinese partner, included in the arrangement?
The Senators framed these questions as part of a broader push for transparency in corporate taxation and to prevent U.S. taxpayers from subsidizing foreign oil operations.
Debate and Analysis — Revenue, Legality, and Fairness
Is Guyana Losing Revenue?
Critics argue that Guyana may be missing out on billions of dollars in potential tax revenue. Since Exxon’s taxes are paid from Guyana’s share of profit oil, the government effectively shoulders the tax burden.
For example, between 2019 and 2024, Guyana’s Natural Resource Fund received over $6 billion in oil revenue. But independent analysts estimate that the country could have earned significantly more if corporate taxes were directly collected rather than offset against government oil revenues.
ExxonMobil’s U.S. Tax Position
From ExxonMobil’s perspective, the PSA is legally binding and negotiated in good faith. If Guyana issues official tax receipts, ExxonMobil could argue that it is entitled to claim them under U.S. tax law.
However, under the dual capacity rule, the IRS could argue that these are not true taxes but rather a contractual transfer. If so, Exxon’s claims might be reduced or denied.
The Senators’ inquiry is partly designed to test this boundary — and possibly to build momentum for closing loopholes in U.S. foreign tax credit rules.
Broader Implications
For Guyana: The controversy could increase domestic pressure for renegotiating oil contracts to secure a larger share of revenues.
For ExxonMobil: The company faces reputational risks if perceived as exploiting tax loopholes.
For U.S. taxpayers: If ExxonMobil reduces its U.S. tax bill through these credits, it could mean less revenue for the U.S. Treasury.
For global policy: The case highlights challenges in international tax coordination, especially under the OECD’s Base Erosion and Profit Shifting (BEPS) framework.
International Context: Tax Policy and Energy Deals
Global Scrutiny of Oil PSAs
Production Sharing Agreements are common in resource-rich countries seeking foreign investment. However, critics argue that poorly negotiated PSAs can lock in low government revenue for decades, particularly when oil prices rise.
Guyana’s PSA with Exxon has been repeatedly criticized by NGOs, economists, and opposition politicians as overly favorable to the oil companies.
The Push to Reform U.S. Foreign Tax Credits
In 2024, the U.S. Treasury proposed reforms to tighten rules around foreign tax credits, specifically targeting dual capacity arrangements. If adopted, these reforms could prevent ExxonMobil and other multinationals from claiming credits in situations like Guyana.
The Senators’ inquiry may help build support for such reforms, highlighting the need to ensure fair taxation in cross-border energy ventures.
Future Outlook and Predictions
ExxonMobil’s Response: The company must carefully address the Senators’ questions. If it refuses or provides limited details, political pressure may intensify.
Congressional Action: Lawmakers could introduce new legislation to close foreign tax loopholes, especially if public outrage grows.
Guyana’s Position: The government faces pressure to defend its PSA while balancing foreign investment needs with national revenue expectations.
Investor Impact: Greater sc
rutiny of Exxon’s Guyana operations may affect investor sentiment, though the project remains a cornerstone of Exxon’s global portfolio.
The controversy over ExxonMobil’s tax payments in Guyana is more than a corporate dispute. It reflects broader questions about fairness in global taxation, the responsibility of resource-rich nations, and the need to reform international tax rules.
Whether ExxonMobil is ultimately found to have claimed improper foreign tax credits or not, the debate underscores the importance of transparent energy contracts and accountable tax policy.
For Guyana, the challenge is to ensure its oil wealth benefits its citizens. For the U.S., it is about ensuring that corporate giants do not use overseas loopholes to avoid paying their fair share. And for ExxonMobil, it is about navigating an increasingly complex web of political, legal, and reputational risks.
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