GRA Commissioner-General Godfrey Statia (third, from right) with other members of his team at yesterday’s news conference at the GRA headquarters on Camp Street
February 1 ,2020
The Guyana Revenue Authority (GRA) is actively participating in the ongoing audit of the US$460 million in pre-contract costs claimed by ExxonMobil and its co-venturers and is working to have a 24-hour presence on offshore oil operations and closed-circuit television access as it yesterday promised strict tax oversight of the petroleum sector.
“There is a full gamut of activities that we are required to monitor and evaluate… just to say that we have been successful and the next [oil] lift is slated for tentatively the 3rd or 4th of February and we are in full state of readiness to attend to those duties,” Head of the GRA’s Petroleum Unit Lancelot Wills yesterday told a press conference held by the agency to bring the public up to date on its activities.
Wills along with Commissioner-General of GRA Godfrey Statia updated the media on what the agency has been doing as it pertains to the petroleum sector and said that even as they are prepared for tax oversight of the sector, they are simultaneously working with the United Kingdom firm IHK Markit to audit cost oil, which could be up to 75% of annual revenues.
“The efforts of the GRA is wide. We have actually mirrored the external auditing firm. So if they had brought in two auditors, we have two auditors, they brought in a petroleum engineer we have a petroleum engineer. Every skill they would have brought in, we would have mirrored those skills so the persons from the GRA could learn from that audit going forward. We have also had training with the IMF and these people and self-training,” Statia said.
Wills added that as the agency prepares for the petroleum sector, it has divided its resources and has established a dedicated Auditing Department and an Interim Customs Petroleum Unit, the latter which becomes the GRA’s Petroleum Unit from April 1st this year. The petroleum auditing department will become a part of the overall Petroleum Unit when it takes effect.
Wills explained, “One department concerns itself primarily with audit and the other with the customs functionality which are customary in customs, such as the processing of shipments, transshipments, import, transits, exports…”
The Production Sharing Agreement (PSA) between Guyana and Exxon affiliate, Esso Exploration and Production Guyana Limited (EEPGL) and its co-venturers states that the pre-contract cost “shall include four hundred and sixty million, two hundred and thirty-seven hundred thousand and nine hundred and eighteen United States Dollars (US$460,237,918) in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015.”
At a cost of US$300,000, government in December hired the UK-headquartered IHK Markit to undertake the auditing of the pre-contract charges.
The work programme, according to head of the Department of Energy (DoE) Dr. Mark Bynoe, is expected to last four months but government has not decided as yet if the findings will be made public.
The DoE and the Guy-ana Geology and Mines Commission (GGMC) will also be working along with the GRA on this project and Bynoe has said that the DoE has secured legal expertise to also assist the audit process.
Bynoe had last year said that this country lacks the capacity to audit pre-contract costs for oil recovery and had revealed that an international firm would be hired to aid both the GRA and the state audit office to discharge their obligations.
It was his belief that Guyana cannot yet undertake its own audits in that particular area due to lack of capacity and as a result made the move to procure international services to assist local agencies with the transfer of oil and gas content knowledge.
‘Better’
When Statia was asked by this newspaper about the readiness of his agency for the auditing of future developmental costs and pre-contract costs of other operators, the Commis-sioner-General was confident that the tax agency will be able to undertake its mandate.
He pointed out that around eight persons from the GRA are currently working alongside the IHS Markit staff.
He did not give a timeframe of how much training or experience will be needed before the GRA can begin doing audits for the sector on its own but said that he believes that some of his staff are even “better” than the auditors here.
“We will meet a state when we would be self -sufficient. However, we have to ramp up training and they [the operations] ramp up production. We right now have some people who [are] even better than some of the internationalists that try to come and teach us,” he said.
Statia said too that while the agency is only responsible for the tax and customs aspect of the oil and gas contracts, it monitors the current affairs of the sector.
But even as the GRA gains experience, Statia said that they were executing other duties and has told ExxonMobil that it intends to have a 24/7 presence on the Floating, Production, Storage and Offloading (FPSO) vessel and to make necessary arrangements.
Statia said that all the agencies involved and the operator are currently working out a system of having staff accommodated for the needed around the clock monitoring, even as it prepares to have livestreaming of operations to its Georgetown office.
“We now have identified the persons who will be going there, whether they should be there on a weekly basis…we are working out that modality, the office space and the types of computers and all sort of things,” he said.
In addition, the Liza Destiny FPSO platform has also been declared a sufferance wharf and warehouse to cover the GRA’s legal end so that items may be stored there until clearance is given.
“We have declared the FPSO a sufferance wharf and private warehouse. This is essential in as far as a monitoring presence. We reserve the right to be fully embedded with the crew and staff of the FPSO so that we can exercise the kind of surveillance that is required and for which the Guyanese public has been clamouring. This is our mandate and it satisfies the requirement of Section 101 of Chapter 82:01 of the Customs Act,” Wills said.
Public concerns have also been raised that the constant hiring of foreign firm for audits is detrimental to local interests.
“How are we assessing these foreign firms to ensure their interests are aligned with ours? Do the foreign firms we engage also have the oil companies as clients? If so, then these firms would have a conflict of interest. We should be hiring foreign firms that have a proven track record of acting in the best interests of developing countries like Guyana versus multinational oil companies,” Darshanand Khusial of the local Oil and Gas Network recently wrote.
“For the pre-contract cost audit, Guyanese will be part of the process. But will they just be part of daily summary briefings? Or, will they be engaged in the day-to-day operations to learn the finer points of the work? If Guyanese participants don’t have the educational background of the foreigner auditors doing the work, how will they be brought up to speed in the 4-month period of the pre-contract cost audit? If the teacher determines the students can’t count, it would be pointless to have them participate in a class verifying the results of calculus equations,” he added.
