ExxonMobil 2016 contract contradicts Jagdeo's claim that Guyana cannot do real time monitoring of costs

ExxonMobil 2016 contract contradicts Jagdeo’s claim that Guyana cannot do real time monitoring of costs

Aug 28, 2022 News

– contract gives Guyana the power to demand monthly bills

By Kiana Wilburg

Kaieteur News – Vice President, Dr. Bharrat Jagdeo at a recent press conference said Guyana cannot engage in real time monitoring of costs since this is not catered for by the 2016 Production Sharing Agreement inked with ExxonMobil affiliate, Esso Exploration and Production Guyana Limited (EEPGL), and its partners – Hess Corporation and CNOOC Petroleum Group. In fact, Jagdeo specifically stated that the absence of a co-management arrangement prevents the country from knowing what costs are being racked up by Exxon early on and to ascertain which amounts are inflated.

Vice President, Dr. Bharrat Jagdeo

However, that 2016 deal contradicts the VP’s claims. Section Seven of the deal which pertains to Statement of Expenditure and Receipts says the country has the power to demand Exxon submits monthly or quarterly, its expenses for offshore operations. This would therefore give the country a chance to verify costs at an early stage as opposed to waiting until the end of the calendar year to conduct audits in a two-year deadline.

Section 7.1 states: The Contractor shall prepare with respect to each Calendar Quarter, or on a monthly basis if requested by the Minister in writing, a Statement of Expenditure and Receipts under the Agreement. The Statement will distinguish between Exploration Costs, Development Costs and Operating Costs consistent with the individual categories specified in Sections 2 and 3 herein and will separately identify major items of expenditures within these categories. The statement will show the following: (a) Actual expenditures and receipts on a monthly basis for the period in question. (b) Cumulative expenditure and receipts for the budget year in question. (c) Cumulative expenditures and receipts since the Effective Date. (d) Latest forecast of cumulative expenditures to year end. (e) Variations between budget forecast and latest forecast, with explanations thereof Subject to 7.1, the Statement of Expenditure and Receipts shall be submitted to the Minister no later than thirty (30) days after the end of such Calendar Quarter or Month as the case may be.”

Under the arrangements of the contract, the Minister shall have the right to audit upon 90 days written notice, at his sole cost and expense, accounts and records of the Contractor.

The contract states that the Minister may audit, examine and verify, “at reasonable times during normal business hours but not more than once per Calendar Year, all charges and credits relating to the Contractor’s activities under the Agreement and all books of accounts, accounting entries, material records and inventories, vouchers, payrolls, invoices and any other documents, correspondence and records necessary to audit and verify the charges and credits.”

During the annual audit, the Minister has the option to review items previously subjected to audit in earlier years.

However, the contract stipulates that the review shall only be carried out in conjunction with the annual audit for any given year. The PSA also states that at the conclusion of each audit, ExxonMobil and the Government shall endeavour to settle outstanding matters and a written report will be issued to the Contractor within 60 days of the conclusion of such audit.