Latest update November 20th, 2024 1:00 AM
Apr 01, 2018 ExxonMobil, News
By Kiana Wilburg
Since the citizenry was informed that ExxonMobil has submitted a US$460M bill regarding pre-contract costs, one burning question was being asked repeatedly—was this sum verified or audited?
Business Minister, Dominic Gaskin, who is a member of the special quintet assigned to look at oil and gas matters, was unable to provide clarity recently on the matter.
On the television show, Plain Talk, which is hosted by Chartered Accountant, Chris Ram, Gaskin was asked a series of questions. One included whether the US$460M bill was verified or not. The Business Minister was not in a position to give such an assurance.
Minister of Natural Resources, Raphael Trotman, was asked the same question. “Of course it was. You need to speak to (Commissioner General of the Guyana Geology and Mines Commission) Mr. (Newell) Dennison again, and he will explain.”
The Minister said that it is GGMC which tracks the work programme of companies, including expenses.
GGMC Commissioner General, Newell Dennison’s version of the US$460M pre- contract costs is a far cry from what Trotman had to say.
Dennison said, “We were satisfied that the amount that was identified , based on the programmes of work that was done before, up to the point in time when the aligned arrangement was done, represented the expenditure up to that time.”
How did GGMC “satisfy” itself that the figures were correct?
The GGMC Commissioner General stated, “Because the programmes that were done, there were estimated costs for those programmes (by ExxonMobil).We would have had the work programme that was approved from the time the contract started from 1999 to 2015. So it would have been based on those costs.”
Asked to say if an audit was then conducted on those costs, Dennison said, “We didn’t do an audit.”
He said that it is not that GGMC took what the company said with blinders on, but, it all seemed “reasonable.”
Kaieteur News then explained to Dennison that his statements contradict that of the Minister who said that the pre-contract costs were verified.
To this Dennison said, “Well that is why I was cautious as to whether I should say anything at all because verification and satisfaction are two different things. But in terms of an audit, no, an audit was not done.”
Asked if there was any shred of verification of the figures, the Commissioner General answered in the affirmative.
He explained that ExxonMobil would have submitted financial statements on the expenditure it incurred on an annual basis.
But when challenged to say if in each year, GGMC sought to verify that the numbers were adding up; that they were not padded, Dennison said, “No, we have never done.”
The Commissioner General added, “(ExxonMobil) would have submitted documents and there would have been accounting documents that were prepared by accountants and submitted saying that yes, these are the expenditures that have been done by such and such and such for the years so, so, so, so, so.”
NOT ADDING UP
While Dennison is convinced that the pre-contract costs are “reasonable”, there are several local critics, who by virtue of their own investigative work, have found that the numbers just aren’t adding up.
With the use of financial statements, Chartered Accountant, Chris Ram, was able to show how ExxonMobil’s pre-contract cost opens itself to much question and suspicion.
He noted that ExxonMobil is represented by three companies as the contractor for the Stabroek Block: Esso, CNOOC and Hess. No financial statements can be found here for Hess.
Turning to the financial statements of Esso and CNOOC, Ram pointed out a few important figures.
Ram stated that the combined expenditure of Esso and CNOOC at December 31, 2015 was $26B and reported losses of $21B, giving a total of $47B. In United States Dollars, using a $200 rate, Ram said that this gives a total US$245 million, well short of the US$460 million that the Government has accepted in the Agreement with ExxonMobil.
To make up the total of US$460 million, Ram said that Hess alone would have had to spend, in contract costs, some US$215 million or approximately $46B.
He said, “That defies logic and credulity. But there is more. It must be a stretch that the pre-contract cost of CNOOC which only entered the sector in Guyana in late 2014 would have incurred greater contract costs than Esso.
And an even greater stretch that Hess which signed with Esso in late 2014 would have spent nearly as much as Esso and CNOOC combined.”
Ram continued, “One would recall that Esso signed its first Petroleum Agreement in 1999, and it is the company which has been reporting all the oil discoveries. That either CNOOC or Hess which entered the sector in late 2014 would be outspending Esso arouses particular interest…”
Having looked at the available information, the Chartered Accountant said it is hard to avoid the conclusion that the US$460 million cannot be explained on any rational basis. Ram stressed that the only satisfactory and acceptable resolution of this matter is a special audit independently undertaken.
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