Guyana must examine Exxon’s US$4.5B exploration bills with suppliers

Guyana must examine Exxon’s US$4.5B exploration bills with suppliers – NRGI

Aug 13, 2021 News

Due to high incidence of corruption…

Kaieteur News – In the petroleum sector, suppliers of goods and services do significant work for large multinationals like ExxonMobil and Shell Corporation. But there is overwhelming evidence that has shown over the years, just how endemic corruption can be between oil companies and suppliers.
According to research and analysis conducted by the Natural Resource Governance Institute (NRGI) on this matter, it was found that 64 percent of petroleum projects reviewed in over 40 countries was over budget due to incidents of corruption. One area that saw such high cost overruns was exploration costs, said NRGI.
In Guyana, NRGI pointed out that exploration costs are estimated to be US$4.58B based on estimates provided by Rystad Energy, a Norwegian Consultancy. Given what it has observed from its research, NRGI, which is headquartered in the USA, advised that Guyana should check these costs which were racked up with suppliers to ensure they are correct.
It also urged Guyana to consider the impact of exemptions in the oil sector. In this regard, NRGI said Guyana ought to examine exemptions on Withholding Tax to subcontractors or affiliated companies of ExxonMobil during the exploration period for the Stabroek Block.
“Given Rystad estimates that operator ExxonMobil spent US$4.58 billion on exploration in the block through the end of 2019; we estimate that exempted Withholding Tax up to this date could be more than a hundred million (US) dollars…” NRGI stated.
It should be noted that ExxonMobil continued its aggressive exploration campaign in the Stabroek, Kaieteur and Canje Blocks post COVID-19 which hit Guyana in March 2020. But the costs post-2019 remained unpublished by ExxonMobil and its partners as well as the PPP/C Administration.

INFLATION BY ANADARKO
Like NRGI, Kaieteur News’ independent research also uncovered several cases of inflated exploration costs which left nations suffering millions in losses.
Anadarko, for example, had claimed that its exploration costs through to year-end 2012 were estimated at US$700 million in Mozambique. But one-year later that cost magically increased to US$3B. More specifically, on September 13 2013, Anadarko’s CEO, Al Walker, had indicated during a visit to Tokyo, that “at the end of the year the group would have invested US$3 billion in prospecting in Area One of the Rovuma basin in northern Mozambique.”
The claim of US$3B in exploration was repeated numerous times since September of 2013, and was confirmed by Anadarko in response to a direct question from the Centre for Public Integrity, another international transparency watchdog. But the increase in exploration expenses was difficult to understand since there was no indication of such extraordinary expenses in Anadarko’s 2013 annual report. Each year, companies listed on a US stock exchange are required by law to file an annual report with the US Securities and Exchange Commission. Strict rules exists on how these reports are to be prepared in order to protect the rights of investors.
According to Anadarko’s 2013 annual report, global exploration costs for Anadarko in that year were only US$1.3 billion, and this included activity in the Gulf of Mexico, Sierra Leone, Kenya, Côte d’Ivoire and New Zealand, in addition to Mozambique.
Despite repeated requests, Anadarko has refused to provide the public with a plausible answer as to how exploration expenses of US$700 million at the end of 2012 increased by US$2.3 billion in only twelve months. The Government of Mozambique had commissioned an audit to be done in light of the said disparity but the money was nonetheless recovered in the meantime.

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