Guyana can dictate airfare expenses of oil operators- Oil Consultants

Feb 10, 2019 News

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By Kiana Wilburg

There has been mounting concern over the airfare bill ExxonMobil is racking up; a bill which the nation will have to pay when the oil giant claims it in cost recovery.
But several oil and gas consultants are saying that Guyana’s authorities can put an end to this practice. They posit that the government can stipulate what airfare expenses the oil operator is to incur or even outright refuse to pay what is not deemed to be reasonable.
Oil Consultant, Dr. Jan Mangal explained during an interview with Kaieteur News that in cost recovery, the oil operator can claim for money it spent on a number of things, one of which includes airfares. He contended, however, that the country can regulate anything that has to do with cost recovery.
Dr. Mangal said, “Guyana can dictate anything with cost recovery because the objective is to ensure that costs being claimed are reasonable. The country can refuse to pay for costs it deems unreasonable.”
The consultant then pointed to instances where countries refused to pay costs claimed by oil companies. He also stated, “We can recall some ministers saying Exxon should not be audited and Exxon would never inflate costs. Christopher Ram and I said the opposite, and called for audits.

“But the issue with these airfares is the tip of the iceberg; Exxon is probably defrauding Guyana of US$100’s of millions via cost recovery, in addition to the billions being taken with the unfair contract.”
Dr. Mangal who worked as a Petroleum Advisor to the President also made comments on the matter via his Facebook Page. Responding to a question sent to him, he said that there is no need for Guyana to do away with Production Sharing Agreements (PSAs) to bring an end to cost recovery woes.
He said, “Many countries have PSAs. The problem is the government’s refusal to manage the contract. The problem is the government’s refusal to lift a finger to protect Guyana’s interests under the contract.
“We need large teams of highly qualified and ethical oil and gas professionals, but the government has ensured we have none, as this benefits Exxon. With regard to the cost recovery of flights, other countries are able to handle this.
“Some countries restrict which oil company personnel can travel on which flights and in what class, etc, etc. But Guyana just wants to sit back and let Exxon take everything. And the PPP would be no better.”
Kaieteur News also spoke with several industry stakeholders at the recently concluded energy conference in Trinidad and Tobago. They included Chairman of TT’s Energy Chamber, Eugene Tiah; Renewable Energy Consultant, Siana Teelucksingh; and International Energy Consultant, David Small.
The consultants shared the view that cost recovery is an area that needs strict management by Governments to ensure overpriced items are not allowed to further chip away at the government’s take from the oil project.
Energy Consultant, David Small, said that in Trinidad and Tobago, the oil operators are required to submit statements and these are reviewed for reasonableness every three months. He said that if abnormalities are found, the authorities ask for more information, and if it cannot be justified then the operator will not be able to recover that sum from the country.
Just last week, Opposition Leader, Bharrat Jagdeo, acknowledged the fact that Guyana has a right to scrutinize all costs being recovered by oil companies. He went as far as to say that under a People’s Progressive Party (PPP) government, “every cent” that will be charged by the operator must be for services that were competitively procured.
It was last year November that US aviation giant, American Airlines, started flights between Guyana and the US, adding the important Miami to Timehri route.
It was widely thought at the time that the coming of flights from one of the biggest airlines in the world would help to bring prices down.
However, the presence of American Airlines has done everything but help to drive prices down.
Guyana as part of its oil profit-sharing arrangement with ExxonMobil for the Stabroek Block is responsible for all oil exploration expenses including those for travel and accommodation. The travel expenses include the cost of air tickets for the staff of the oil companies.
The ExxonMobil staff is flown home every 28 days on rotation. Reportedly, American Airlines, which uses an Airbus 319 aircraft with 130 seats, is the main carrier for the oil companies operating in Guyana. Local company Roraima Airways is handling the ground operations on behalf of AA.
Last Monday, the price for a one-way economy class ticket from Guyana to Miami from Caribbean Airlines, was US$295. Whereas, the price for the same ticket from Suriname Airways on the same route was US$285.
For American Airlines, it was more than double at US$731.
Guyana was handed a pre-2015 exploration bill of more than US$800M by ExxonMobil. Later this year, it will be handed another bill for post-oil cost. Those costs include hotel accommodation, air travels, and other miscellaneous expenses.

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