Latest update February 16th, 2025 7:49 PM
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Govt’s. failure to meet 2-year audit deadline; Guyana is now forced to pay US$9.5B for Liza 1&2 Projects
Map showing the location of the Liza Phase One and Two Projects in the Stabroek Block basin.
Kaieteur News – Due to the nation’s failure to conduct cost audits within the two-year deadline prescribed in the Stabroek Block Agreement, Guyana has no choice but to allow ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), to recover all stated costs for its Liza Phase One and Two Projects. Both initiatives total approximately US$9.5B.
During his latest press engagement last week, Vice President, Dr. Bharrat Jagdeo said the government is disappointed that it has not been able to push through with these critical post-2017 audits.
Expounding further, the Vice President said, “We have been very disappointed that we have not been able to select a group to do the audit of the post-2017 expenditure by Exxon. The reason is that we didn’t have strong local content. We had two groups, two local groups that came in but they were not strong enough. We want to build the capacity in Guyana to do this audit. We think that our people have enormous skills, forensic skills and auditing capacity.”
The former President added, “…we’re looking to see if we can’t have an arrangement where we have a consortium of our local people to come together to do part of this work while working alongside an international group…”
Dr. Jagdeo said he has since asked the Natural Resources Minister, Vickram Bharrat to examine the possibilities of getting together, all of the groups from Guyana which have an expressed interest in working with a foreign company on this front. He said this is the preferred option as the country desperately needs to increase its auditing capacity and competencies.
In addition to being able to recover the costs for Liza Phase One and Two, Exxon will also be able to recover without any challenges, the US$460M, which the oil company claimed was expended prior to the signing of the 2016 Production Sharing Agreement (PSA) governing the Stabroek Block. It had said this money was spent on all the exploratory work that was needed for the massive 2015 Liza discovery.
The only costs Guyana stands a chance of auditing and refuting if unreasonable charges are found are those occurring from 2019 onwards. It therefore means that the PPP/C Administration still has ample opportunity to review costs expended for ExxonMobil’s Payara Development Project in the Stabroek Block. This project is expected to cost US$9B.
Given the nation’s capacity deficiencies, international transparency bodies have strongly contended that the two-year deadline the government has accepted, along with the fact that it can only do one audit per year, is not sufficient. They have stressed that the timeline should be extended. Specifically making this point is Oxfam America. It has made this perspective known since 2015 alongside the International Monetary Fund (IMF).
Oxfam America, a confederation of 20 charitable organisations which seek to fight poor governance of extractive wealth, has said that the expiration periods for audit rights are set out in petroleum contracts and tax laws. It stressed, however, that these deadlines differ from one country to the next. It noted that in Ghana and Kenya for example, the authorities there retain the right to complete auditing companies within seven years. In Peru, the time limit for audits is a minimum of four years. Even in the USA, the transparency body highlighted that audits are allowed to be completed within a minimum of three years.
Oxfam warned however that even a three-year deadline is not advisable for developing countries such as Guyana given the limited financial and human resources that are likely to delay the audit process. Further, the organisation said it is equally important to keep an eye on record-keeping provisions in the petroleum contracts and tax laws.
It said, “Oil companies should be required to keep all their records in-country for easy access by the auditors during the audit period. But once that period expires, it becomes very costly to access records and therefore practically impossible to audit them…”
Oxfam warned that Guyana needs to take the auditing timeline for these costs as a matter of grave concern as it could cost the nation billions more.
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