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Cost Recovery Audit for ExxonMobil’s US$460M pre-contract costs extended
The contract to audit ExxonMobil’s US$460M pre-contract costs is progressing well but due to the impact of the novel coronavirus which has restricted travelling, the authorities here have approved a no-cost extension for the consultant, IHS Markit. This was recently disclosed by Energy Department Head, Dr. Mark Bynoe during an online press conference with members of the media on Monday.
Energy Dept. Director, Dr. Mark Bynoe
Dr. Bynoe said that there are some aspects of IHS Markit’s work programme which would require its officials being here to work with a multi-agency team, hence the grant of the extension. That multi-agency team includes a number of officials from the Guyana Revenue Authority (GRA).
For the time being, GRA’s Commissioner-General, Godfrey Statia, has said that he is in receipt of an initial audit report for the pre-contract costs Guyana must pay to ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL). Following same, discussions he said, would be held with IHS Markit.
In its Expression of Interest (EOI), the London-based firm had stated that it has the deepest source of information, analytics and solutions for the major industries such as oil, while noting that it has provided its expertise to clients in over 165 countries for more than 50 years. The company further stated that it understands the holistic impact of costs on upstream operations.
In terms of what it is bringing to the table for Guyana, IHS said that it has a comprehensive global database of exploration and production costs. It said that this data includes local and regional costs at the component level so as to allow for detailed comparisons.
IHS also said that it has developed proprietary software solutions and tools to gain insights into costs faced in the exploration and production sector. It said that it uses cost estimation tools such as Que$tor and Vantage, paired with its rich databases, to provide industry leading cost analysis.
PRE-CONTRACT COSTS
International lawyer, Melinda Janki, was one of the first persons to note that the country is neck-deep in pre-contract costs. During a panel discussion that was held on Guyana’s oil contract with ExxonMobil at Moray House, Janki reminded that the country has to pay US$460M in pre-contract costs. This covers the period 1999 to 2015. But there is a second lot. Janki noted that the contract specifically states that Guyana is to pay contract costs from January 2016 to when the deal was signed on October 7, 2016.
The international lawyer had said, “The costs for the whole of 2016 were about US$583M and if you apportion it to October, you get roughly US$400M.” This, by her estimation, brings the pre-contract costs to US$960M. Be that as it may, the costs being audited by IHS Markit is the US$460M portion that is listed in the Stabroek Block Production Sharing Agreement (PSA) as recoverable.
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