Jagdeo dodges question on Govt.’s monitoring of oil companies expenses

Jun 22, 2022 News

– says audits can pick up inflated costs

Vice President Bharrat Jagdeo

Kaieteur News – Even though ExxonMobil is deducting 75 percent of Guyana’s oil towards its expenses upfront, the country seems to have no mechanisms in place to monitor the US billion-dollar spending of the oil companies, as the nation’s Vice President, Bharrat Jagdeo, could not state whether the country has mechanisms in place to oversee and authorise any spending activity.
When Jagdeo was asked on Tuesday during a press conference to specifically say who is monitoring the spending, he shifted the discussion to stakeholders in the Stabroek Block. He said, “We’re a 50/50 business not from a management perspective. You have a different perspective…CNOOC is an investor, Hess is an investor, Exxon is an investor. The three of them own the consortium so then they hire an operator which is the management firm. So even CNOOC who has 25 percent shares and Hess 35 percent shares, they don’t make management decisions.”
He elaborated on the fact that the oil companies own 100 percent of the venture but yet they are not privy to decision making. In Guyana’s case, he told the publisher of Kaieteur News, Mr. Glenn Lall, that the country gets 50 percent of the profit but are not 50 percent owners of the company. Even though Jagdeo was not asked to elaborate on stakes and ownership, he went on “the company is owned 100 percent by these three entities that I just explained. We get 50 percent of the profit…”
The Vice President was then asked how Guyana could be certain that their 50 percent share of profit is accurate. To this, he noted, “If we don’t have a say in a private business, how do we determine profit? The GRA (Guyana Revenue Authority) every year looks at this. Remember there are two audits; the GRA has an audit where they can audit for that purpose that you were talking about, then there is a separate audit which is determined by the PSA (Production Sharing Agreement), which is the audit we are doing now.”

Kaieteur News Publisher, Mr. Glenn Lall asks a question during the press conference

Lall, who is also a businessman, then reasoned that ExxonMobil can hand Guyana a bill for US$1 billion as a cost for a Floating Production Sharing and Offloading (FPSO) vessel, when the company only spent US$300 million. He related, “Isn’t that shortening our share? Who is authorising and who is okaying?”
To this end, the Vice President assured that such costs are verified after the oil company hands Guyana a bill. According to him, “So assuming they claim in the books a billion dollars, but only spent $700 million or inflate the price. The industry average is only $700 million for this piece of equipment that they claim to be a billion dollars, then the government in the audit, determined by the PSA can flag that transaction and we can investigate the transaction and should we find that this transaction here doesn’t meet industry standard then they can’t claim that…assuming its true then the $300 million goes then to profit oil for redistribution.”
It was only last month that government signed a contract for a four-month review or audit of ExxonMobil’s expenses between the years 2018 to 2020 that has already been billed to the country. This bill stands at US$9 billion.
Concerns have already been raised about the short timeframe that the company will be required to complete the audit, given the large sums involved, but the government is confident that the country will get a chance to conduct a proper review of the expenses within the four months timeline. Kaieteur News had asked the Natural Resources Minister, Vickram Bharrat at the signing of the contract whether he feels the time span was adequate for the audit of the US billion-dollar expenses to which he assured that the government is quite comfortable with the arrangement.
“We consulted with the company before we actually set a timeframe. It wasn’t done by the ministry in isolation. We would have consulted with them and this is the time that they are comfortable with; it’s a timeframe that we are comfortable with too, as well as the international companies who are involved, and they will be working dedicatedly on the audit for the next four months so we are pretty much comfortable that it can be completed by the consortium and the international partners.”
The minister assured that the report will be made public, following the review of the expenses.
The consultancy was awarded to VHE Consulting which is a registered partnership between Ramdihal & Haynes Inc., Eclisar Financial, and Vitality Accounting & Consultancy Inc. The Local Consortium is supported by International firms – SGS and Martindale Consultants for the ‘Cost Recovery Audit and Validation of the Government of Guyana’s Profit Oil Share’.