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US$460M pre contract cost… Govt. obligated to respond to legitimate concerns about “huge sums Guyana will have to pay back” – Jagdeo
Opposition Leader, Bharrat Jagdeo
By Abena Rockcliffe-Campbell
Concerns remain about the US460M pre-contract cost that Guyana has committed to repaying ExxonMobil. In fact, Opposition leader, Bharrat Jagdeo has said that government’s silence on the legitimacy of the pre-contract cost is cause for worry.
Jagdeo said this last week at his press conference.
The former President said that government should not be ignoring the legitimate concerns of citizens. Further, Jagdeo said that it would actually be in the government’s best interest to address the matters so as prevent citizens from believing what might not be true.
He said, “This government should be rushing to answer these questions or people will conclude, as most have, that corruption is afoot.”
Jagdeo acknowledged that Chartered Accountant and Attorney at Law, Christopher Ram has been writing extensively about the woes of the nascent oil sector in Guyana.
The former President said, “He asked a couple of good questions and the most important was, did we verify this figure (US$460M) before we put it as a commitment?. He asked also, who verified the figure? We need to know if the financial statements of the company were considered.”
Jagdeo said, “These are reasonable questions, government should give answers to those because what is at stake, is a huge sum of money that Guyana would have to pay back basically.”
In recent writings, Ram noted that the US$460M pre-contract costs claim submitted to the Guyana Government by ExxonMobil’s subsidiary is overstated by at least US$92M.
Ram analysed the financial statements which have been lodged by ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), CNOOC/Nexen and Hess, and said they and the government must now justify the US$460M figure. The analysis of the figure had been held up as Hess only recently filed its financials here.
Chartered Accountant, Chris Ram
The US$460M in pre-contract costs pertains to the period from 1999 leading up to December 31, 2015.
Ram’s computation of the three figures supplied by the companies shows that even allowing for all expenses and expenditure, the total falls well short of the US$460,237,918 claimed by them.
Ram had written, “I say at least, because not all expenditure is recoverable as pre-contract costs. For example, Esso had close to US$5 million in current assets, mainly in inventory, which will be expensed as they are placed into use and consumed. Only at that point should they be expensed as contract cost. Therefore the amount should not be included as pre-contract cost.”
Jagdeo said that if Ram can come up short US$92M then a clarification should be given as to why. “Because he took all cost into consideration and all cost is not cost recovery.”
Ram had said that unless ExxonMobil and its partners can come up with answers and explanations as to what appears to be a very significant difference between the amount claimed and what the financial statements at a gross level reveal, they will encourage suspicion of grave impropriety in overstating their claim.
“It is clearly in their joint and several interests that they provide full, complete and credible explanations supported by authentic documentation capable of withstanding a rigorous audit, and that they agree voluntarily to submit themselves to such an audit. I will raise those questions next week after first holding our government accountable”, Ram asserted.
Ram has also posed a series of questions to the government including, “Was the figure US$460,237,918 set out in the Annex supported by detailed statements by each of the three companies? Was any verification exercise done of the pre-contract expenses figures and information provided? If so, by whom? Was the Audit Office asked to verify the figure? Who checked to verify that the sum claimed was consistent with the rest of Annex C, in terms of categories, allowed and not allowed etc.? If there was no verification at that stage, why was provision not made for such verification at a later date? “
Ram argued that the pre-contract cost ranks with the royalty, stability clause, no tax and secrecy, as the more egregious features of the 2016 Agreement, and said it would be good if at least this one is put to rest to the satisfaction of Guyanese.
He warned: “On the other hand, the oil companies must know that they ignore these questions at the risk of their reputation. Guyanese are not gullible or without options”.
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