Audit of ExxonMobil’s US$460M pre-contract costs an abomination

Jul 22, 2021 News

– Govt. should make report public – Source

Kaieteur News – Upon reviewing reports pertaining to the audit of US$460M ExxonMobil claimed was spent prior to the discovery of oil in 2015, a reliable source has deemed the findings to be “an abomination.” In fact, the source urged this newspaper to challenge the government to make the audit report public as it would expose how many loopholes have been left unaddressed.
Kaieteur News had previously reported that the audit of the pre-contract costs was done by IHS Markit, a British firm, at a cost of US$300,000 ($62.6 million) in 2019.
The contract had to be extended in May 2020 at no cost, due to the COVID-19 pandemic. At the time, former Head of the Energy Department, Dr. Mark Bynoe, had said this was mainly due to flight restrictions.

Vice President, Dr. Bharrat Jagdeo.

Following the audit, a final report was awaiting comments from ExxonMobil for some time but those have been received. The source said it is quite saddening, especially in the interest of transparency and accountability, that the government has been silent about the results thus far. The reputable industry stakeholder who is also a trusted advisor to the administration further noted that the political opposition should utilise the powers of special select committees on natural resources to demand answers on these audits which will cost Guyanese taxpayers billions of dollars. The government advisor further questioned, “If these reports are not made public, how else will the Guyanese people know that the company selected for these audits did their job and gave the country value for money? How else will the public be able to have confidence that the government can be trusted to be a prudent overseer?”
Vice President, Bharrat Jagdeo, had revealed during previous interviews that Guyana has in excess of US$6 billion in oil related expenses to audit from petro-giant ExxonMobil and other Stabroek Block partners, affiliates and sub-contractors.
The country has a long way to go with little window to conduct its audits. Per the Production Sharing Agreement (PSA) Guyana signed with ExxonMobil in 2016, the Minister with responsibility for the oil sector has only two years to audit the expenses incurred by the US supermajor at the end of each fiscal year.
That is to say, the Minister would have had only up to 2017 to audit expenses incurred in 2015. And not only that, the government would also have to foot the bill for all costs associated with that very audit. If the government fails to honour the contractual timelines, it would have to accept all costs as correct.
Jagdeo had said too that costs incurred up to 2017, which total approximately US$1B, have also been audited but he has yet to provide the public with an update on this front.
It was only yesterday that Kaieteur News reported that several companies have submitted bids to audit costs incurred by ExxonMobil and its partners for the period 2018 to 2020. Eclisar Financial and Professional Services, which provides accounting assistance and financial advice for Guyanese businesses, was the only local bidder among five companies which submitted bids to provide consulting services for cost recovery audit and validation of the Government’s profit oil share.
Bayphase Oil and Gas Consultants; Rosa, Correia & Associados (RCA) Inc. in partnership with Swale House Partners; Gaffney Cline and Associates in partnership with Squire Patton Boggs; and Calender Law Firm were the other firms which expressed their interest in working for Guyana.
Bayphase, which was established in 1986, is a United Kingdom (UK) company that is a recognised leader in the assessment of all costs associated with oil and gas projects. The UK firm was hired by Guyana back in 2019 to review and evaluate the Payara Field Development Plans.

Rosa, Correia and Associados Inc., which is a Portugal based company, established in 1980, provides auditing and consulting services. It is registered with the Association of Chartered Accountants, which is a part of the International Federation of Accountants (IFAC). Meanwhile, Swale House – RCA’s partner in the bid – is a US company that claims to provide natural resource risk management services. According to the company’s page, “we are a team of risk, technical and management specialists with extensive experience assisting government managers improve outcomes during natural resources and public finance transitions.”

As for Gaffney Cline and Associates, it considers itself to be a petroleum consulting company that is headquartered in the UK and is a subsidiary of Baker Hughes. Baker Hughes is an American international industrial service company that has dealings in Guyana. It is also one of ExxonMobil’s strategic business partners. Squire Patton Boggs is a US law firm that was established in 2014.
Calendar Law Firm is also a US-based law firm.
The cost audit will require the provision of on-the-job training for the employees of the Guyana Revenue Authority (GRA), the Office of the Auditor General (OAG) and the Natural Resources Ministry and agencies as directed by the Government.