‘Failure to audit, verify Exxon expenses should be a criminal offence’’ – Economist

Apr 11, 2022 News

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Kaieteur News – Seven years after Guyana first announced oil finds offshore none of its governments have been able to build the capacity to properly police the country’s resources.
In 2020, Vice President Bharrat Jagdeo appeared on Kaieteur Radio’s Oil and You programme where he sought to explain the magnitude of Guyana’s oil sector. He said that Guyana’s total deposits within the banking system is around US$2.6b. That is, with all the deposits of every Guyanese in the banking system; non –financial banks, the commercial banks and government deposits, Guyana could not even finance the Liza one project which costs around US$4b. In fact, Jagdeo said, it would take eight times the total amount of money Guyana has to develop the Liza 1 and 2 wells and Payara, which will come on stream soon.

Given this analysis, one would assume that after seven years, the Guyana Government would earnestly seek to have measures in place to ensure available resources for auditing huge multi-billion dollar expenses which this country must repay for the development of the sector. However, these measures are not in place, and some stakeholders continue to call for these lapses, and the lack of urgency to save Guyana large sums of much needed revenues to be seen as acts tantamount to criminal behaviour.
Economic and Youth Policy Advisor at the Office of the Leader of the Opposition, Elson Lowe, told Kaieteur News that he believes that failure to financially safeguard the country in this capital driven oil and gas sector should be a criminal offence. The young economist told the newspaper that Guyana has too much to lose if it does not get its act together. He explained that currently, Guyana is pinned to audit oil expenses within a two-year timeframe stipulated in the Production Sharing Agreement that was signed with oil companies. Already, the timeframe to audit the almost US$10b Liza 1 and 2 projects have lapsed and the same could happen to the US$9b Payara project if it is not audited by mid-year.
Given the outcry regarding auditing failures, Lowe said, “… you’d think that there would be a much more robust effort, that there’d be a very aggressive effort to ensure that those costs are now going to be audited.” He said that the amount of money that Guyana could be losing is so much that citizens must understand what is at stake. To drive home his point Lowe submitted that there are studies that have shown that if not for the improper practices of oil companies reclaiming cost in Africa, the entire continent could have been more developed. He reiterated therefore, that given the amount of money involved, Guyanese should seriously press for the audits, and hold those failing to function criminally responsible.
“This US$9b that we are talking about, we are not talking about $9b Guyana dollars. Guyana’s budget is only about 2 half billion United States dollars so this is several times the national budget of Guyana we are talking about in costs. We have to take these things seriously. I personally think it should be a criminal offence for audits to be allowed to lapse.”
Lowe told the newspaper that he believes that some type of framework should be devised to hold officials responsible with appropriate penalties attached. He suggested that this could involve the relevant parties having to adhere to strict rules and having on a regular basis, to submit full reports to the Parliament. Whatever measures are put in place, Low said it should see Guyana being able to protect its finances, while holding those responsible for not doing so. Lowe appeared on the online talk show Politics 101 with opposition Member of Parliament David Patterson days ago where they spoke about why it is important for Guyana to audit its oil and gas financials.
The economist said that based on Inter-American Development Bank anti-corruption training he received while employed at the now defunct State Asset Recovery Agency; and some of which related to the oil and gas sector, he was taught to look out for example, transfer pricing, setting up of shell companies and running inflated cost through them. With proper safeguards, Lowe said these things could be detected.
Outside of major expenses such as machinery/equipment acquisition and transportation cost that are actually related to oil development, Patterson said that Guyana could be paying for Exxon’s Christmas parties, Learjet trips, champagne and hotel bookings without even knowing. He said a party, totally unrelated to oil production, comes up to a million US dollars, they could put that million dollar in the country’s oil bill. He said oil companies also set up shell companies that could be registered for example, somewhere in the Bahamas, and bills Exxon US$5m every month and they pay it when really, the shell company did nothing.
An audit would protect Guyana, auditors would be able to say that those cost are not valid and Guyana would not have to stand them. Patterson said that in relation to the US$9.b, conservative estimates are that Guyana can save as much as US$1billion, almost half of its total budget when illegitimate costs are knocked off.
Lowe warned that Guyanese need to get on their leaders’ backs. He said it would be difficult to have the future Guyanese are looking for if the will to police these costs is lacking.

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