Latest update January 17th, 2025 6:30 AM
Finance Minister Jordan says… Guyana still lacks capacity to audit Exxon’s pre-contract cost
Minister of Finance, Winston Jordan
The pre-contract cost that Guyana has agreed to repay ExxonMobil continues to generate concerns among industry officials. However, being able to audit these costs will help mitigate Guyana overpaying on bills provided by ExxonMobil. So far, US$460M in pre-contract costs has been built into the 2016 Production Sharing Agreement (PSA) signed in late 2016 between the current Government and ExxonMobil.
Nearly two years after the PSA was signed, and with first oil expected in 2020, Minister of Finance, Winston Jordan has admitted that Guyana currently still lacks the capacity to get the audit done.
“It is really a tough issue for us,” Jordan stated.
He added, “We are still putting systems in place to do all the monitoring of expenses by ExxonMobil. I must admit that we hardly have any skills at the moment, but it is not as if we don’t audit this thing in 2015 then we’ve lost all chances.”
Chartered Accountant, Christopher Ram believes that Guyana should not have included the US$460M pre-contract cost in the PSA without having it audited.
He reminded that the US$460M only accounts for 1999 to 2015. Ram is of the opinion that the cost is overstated by US$92M and that additional pre-contract cost should be expected for the period January 2016 to October 2016.
The PSA states that the pre-contract cost “shall include US$460,237,918 in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015, “and (2) such cost as incurred under the 1999 Petroleum Agreement between January 1, 2016 and effective date which shall be provided to the Minister on or before October 3, 2016 and such number agreed on or before April 30, 2017.
International Lawyer, Melinda Janki indicates that Guyana is already in a US$900M hole as of October, 2016.
Costs continue to be incurred from 2016 to now towards the development of the Liza Phase One Project. This will be added on top of the pre-contract cost, which is all cost recoverable.
ExxonMobil has boldly stated to be open to such an audit should Guyana make the request.
But Jordan stated, “We have to find people, set up systems and units for monitoring cost recovery and this pre-contract cost issue.”
He said amazingly, in certain circles, persons have expressed the view that if Guyana lacks the skills, then money should be dedicated from the budget towards that.
“We just don’t have it. I wish the people pointing out these things could tell us where we can find the money. Let them offer solutions along with their criticisms,” Jordan stated.
Further, he explained that the monies needed to contract people to audit ExxonMobil’s costs would have to be advanced to the Government, or Government will have to wait until oil comes on stream, and then use revenues to hire the required people.
“We have to find the money first. Yes, the World Bank gave us US$35M recently, but that could be swallowed up by the new Department of Energy,” Jordan noted.
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