Guyana to audit in excess of US$6 billion more of Exxon’s costs – VP Bharrat Jagdeo
By Kemol King
Kaieteur News – Guyana has in excess of US$6 billion of oil-related expenses to audit from ExxonMobil and Stabroek block partners, affiliates and sub-contractors, according to Vice President Dr. Bharrat Jagdeo.
This was revealed during a recent interview on the Kaieteur Radio show, Guyana’s Oil and You, hosted by Kaieteur News’ Senior Journalist, Kiana Wilburg.
The International Monetary Fund (IMF) had warned Guyana four years ago that one of the most critical challenges it faces is conducting effective cost audits. The Stabroek Block Production Sharing Agreement (PSA) with ExxonMobil only gives the nation a two-year window to contest unreasonable and/or inflated costs.
If it doesn’t audit within the period specified, Guyana will have to accept all the costs and repay every cent to ExxonMobil from the sale of its crude, even if the costs are inflated. This is a matter of national concern, as every cent Guyana is robbed decreases its profits from the sale of the Stabroek block crude.
Guyana has not audited any of the expenditures Exxon claims it has made on the three oil developments, Liza Phases One and Two, and Payara. Those add up to US$18.5 billion.
The Vice President said that US$8-9 billion in expenditures are claimed to have been made in total, so far, and have to be audited. He explained that this includes expenditure on the three wells ExxonMobil already received development approval for – Liza Phases One and Two, and Payara.
“You’ve had 8-9 billion of expenditure made so far, of the 20 billion programme for the three wells. Only US$1.6 billion has been audited…”
The US$1.6 billion covers pre-contract costs.
“We still have another six point something billion dollars to be audited, that we have to get to, of expenditure that’s already made,” Dr. Jagdeo told the Kaieteur Radio panel.
He agreed that Guyana dropped the ball on audits of Exxon’s costs, and placed the blame squarely at the feet of the former David Granger administration. He said that the People’s Progressive Party Civic (PPP/C) had urged the government repeatedly to begin audits on the costs ExxonMobil is claiming.
“What we have to do is to build a capability to do audits within the period specified by the contract,” The Vice President said.
Government, he said, is currently doing that, so that time doesn’t run out on Guyana.
“Not to wait like six years or seven years,” he said, “and we are busy doing that.”
The previous administration allowed years to pass before it contracted a firm to audit the supermajor’s pre-contract costs alone. So far, the firm contracted by the previous administration in November, 2019 – IHS Markit – has completed the audit of US$1.6 billion. The initial report was only submitted early this year.
The Government is set to review a draft report from Markit – the second report in the process, which it accepted from the firm – after which it will submit the document to Exxon and its partners for comments.
The government has made some adverse findings, according to Jagdeo, including issues with expenses it doesn’t consider recoverable, but which Exxon intends to recover.
After Exxon’s comments are made, the government is supposed to instruct Markit to submit a final report.