Jagdeo is Exxon’s latest victim

Jan 10, 2021 Features / Columnists, Peeping Tom

---

Kaieteur News – Glenn Lall, the publisher of the Kaieteur News, has been consistently pointing to the major defect in our oil agreements concerning costs. Guyana, he notes, is being saddled with high pre-contract, field development and oil production costs – all of which have to be deducted from our share of cost oil – without the country having any say in how this money is being spent.
Lall has been unfailing in highlighting the fact that Exxon is simply throwing bills at the government. The government has to pay without having any say in how Exxon is spending this money.
This unsatisfactory state of affairs was put to Vice President Bharrat Jagdeo during his appearance on Kaieteur Radio on December 23rd 2020. This is what he had to say: “After the spending is done, what controls government has because they [government] are not doing the effective spending? Exxon is the operator. So, the expenditure is made and the government way of seeing that they do not cook the books and inflate expenditure or buy from related parties at inflated prices is to do the audit to check for all those things – that is where the government fell down, that is, how you protect the national interest to see that the expenditure is real and that it is the least-cost way of developing the oil fields.”
Jagdeo believes that Guyana has to develop the capability to conduct oil audits. He reposes extreme confidence in post-transactions’ audits, without any reservations as to the limitations of these processes.
However, audits have their limitations. The principal function of the accounting auditor is to pronounce on the health of the accounts of a company to determine whether these reflect the true state of the organization. In his Report for 2019, for example, the Auditor General pronounced that certain financial statements (not all) of the Government fairly and materially reflected the true state of these accounts.
An after-the fact-Audit or post-audit of the expenditure incurred by the oil companies does not provide a satisfactory basis for determining whether the country or the company was receiving value for money or whether there was inflation of costs. Such facts have to be determined by forensic audits or by real-time auditing.
However, Jagdeo does not commit to undertaking any of these. He insists that the audits are the best way to verify expenditure and that the books are not being fabricated. But he does not insist on forensic or real-time audits.
He studiously avoids the core issue which Lall raised – Guyana having a say in the expenditure. Jagdeo continues to hide behind the excuse that no such provision was made in the agreement which was signed by the APNU+AFC and the oil companies.
It was this same Jagdeo who had said that in granting the approval of Liza 1, the APNU+AFC missed the opportunity to get a better deal. He had chided the Coalition for not getting better terms when it approved that permit.
Yet, his government is now being chided for squandering the opportunity presented to it when the Payara Field Development Plan was submitted for approval. The concessions wrested from Exxon were negligible and way short of what was expected. Some analysts have described the government’s actions as a betrayal.
In this regard, Jagdeo had indicated in September 2019 that more revenue could be obtained through audits and a revision of the concessions. Presented with the opportunity to wrest greater concessions from Exxon, the PPP/C negotiating team, presumably led by Jagdeo, failed.
He tethers his hopes for increased revenue on the present audits which must be completed within a two-year period, a time span which would not allow for the sort of inquisition of the accounts that are necessary to determine whether value for money is being obtained, whether there is massive inflation or corruption involved.
Post- transactions audits will not unearth the degree of ‘cooking the books’, price inflation and the involvement of related parties’ transactions as much as real-time audits would. But Jagdeo shows no inclination to go the route of real-time audits.
In the negotiations for the approval for Payara, Jagdeo and company should have negotiated for a greater say in the actual expenditure plan, instead of simply relying on audits to ensure that Guyana is not shortchanged.
Jagdeo has been tried, tested and has failed. He has become Exxon’s latest victim. Perhaps, it is time to see whether the former school teacher can do better.

(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

---

---