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Exxon charges Guyana US$1.6B as recoverable from the sale of Guyana’s oil


Vice President, Dr. Bharrat Jagdeo

By Kaieteur News

Petroleumworld 12 30 2020

ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), has handed a bill of US$1.6 billion for expenditures made in support of its Stabroek block operations.
The supermajor is claiming these funds as recoverable from the sale of Guyana’s oil, as per the terms of the 2016 Production Sharing Agreement (PSA), signed by former Minister of Natural Resources, Raphael Trotman.

Vice President, Dr. Bharrat Jagdeo, revealed this during a recent interview on the Kaieteur Radio show, Guyana’s Oil & You, hosted by Kaieteur News’ Senior Journalist, Kiana Wilburg.
“So far, about US$1.6 billion of the cost – that’s pre-contract cost of US$460 million, plus about US$1.2 billion from the development and exploration cost up to 2017 has been audited,” Dr. Jagdeo said.

That charge has been audited by the UK firm, IHS Markit. According to the VP, the final report was submitted by the firm just a few days before the President, Dr. Irfaan Ali, was sworn in.
However, Markit had failed to convert that report to a draft report. Audit of this nature provide for three reports, of which the final would have been the last, according to the VP… Markit skipped the second report. He said it had done the initial report and submitted it in early 2020.

“They skipped the interim report and we have a big issue with them because the interim report, as is normal for any audit, has to go to the company for them to make comments before the audit is finalized.” Jagdeo said. “So since then, we’ve had some disagreements with Markit.”
The government is set to review the draft report, after which, it will be sent to ExxonMobil for its comments.

The Vice President said that there are some “adverse” findings already about the claims being made by Exxon and other companies. During a previous press conference, Dr. Jagdeo had revealed that some costs being claimed by ExxonMobil are not considered recoverable by the government. He has explained that the government would not allow the oil companies to recover any cost which government does not consider recoverable.

Attorney-at-Law and accountant, Christopher Ram, had said in 2018 that Exxon’s claim of US$460M is overstated by at least US$92M. He had challenged the former APNU+AFC Government to justify the figure it agreed to pay.

His calculation found that all figures supplied by the companies, even when one allows for all expenses and expenditures, amount to a far cry from the US$460,237,918 that Exxon and its partners, Hess and CNOOC Nexen, are claiming. He had said that it is overstated by “at least” US$92M, because not all expenditure is recoverable as pre-contract costs. He maintained even in November that he believes ExxonMobil has cheated Guyana on those costs.

Ram’s analysis only accounts for a fraction of the US$1.6 billion Exxon is claiming.
Despite the fact that the bill was handed to Guyana years ago, it was only late last year that the David Granger administration hired a firm to audit Exxon’s costs.

Dr. Jagdeo sees this as a blunder on the part of the former administration, as the contract places a two-year limit on the right to challenge costs.

“The government at that time could have hired a company immediately to audit the pre-contract costs because at the time it was signed, then you only had pre-contract costs.”

He added: “We were in opposition so we could not have done anything to deal with the audit…Had it hired a company in 2016, we would not have had this conversation today. Had it built the capability within the four years from 2016 to 2020, we would not have had this conversation today.”

Vice President Jagdeo said that what government needs to do is build the capacity to do audits within the specified period. “Not to wait like six years or seven years. And we are busy doing that.”

The current administration, he said, is working to build the capacity of the Guyana Revenue Authority (GRA) to conduct cost oil audits, which he said are different from regular audits. This is expected to be done alongside independent consultants, as Guyana builds its capacity.

Story by Kaieteur News 12 30 2020


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