Natural Resources Ministry has authority to do real-time monitoring of costs

Aug 30, 2022 News

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– several opportunities are at its disposal – Chartered Accountant, Chris Ram

“As for real time monitoring, modern large firms and governments employ Enterprise Resource Planning (ERP) software systems to integrate and manage their day-to-day activities, such as accounting, procurement, project management, risk management, compliance and operations. This can be customized and it also allows for access by to or reporting to partners, suppliers and regulators on a real-time basis.”– T&T Expert, Anthony Paul

By Kiana Wilburg

Kaieteur News – While it is true that the Guyana Revenue Authority (GRA) is empowered with the accounting systems to do real-time tracking of the declared costs for all imports by ExxonMobil Corporation’s affiliated companies, its sub-contractors and its joint venture partners to support their multibillion-dollar operations here, that is only one part of the equation of monitoring costs.

According to Chartered Accountant, Christopher Ram, the Minister of Natural Resources, Vickram Bharrat has the authority and the opportunity to review costs at several stages in the process beginning with the detailed Annual Work Programme and Budget to be supplied to him no later than December 1 of each preceding year. Ram said the Minister has the further power to set conditions in each licence he approves. And it is here that he can deal with the matter of ring-fencing as well. (Ring-fencing provisions ensure that the costs associated with one oil project cannot be carried over or deducted from the revenues of another. This is absent in Guyana’s 2016 Stabroek Block Production Sharing Agreement).

Ram added that these are not the only such opportunities. The Minister receives detailed records of property in use and of all assets acquired and disposed during each year. Moreover, the Minister can send a representative to observe the annual and triennial inventories of the moveable and immoveable assets of the contracting companies.

Then, there is the monthly Production Statement, the quarterly Production and Pricing Statement, the Quarterly – or monthly if requested by the Minister – statement of expenditure and receipts and the Quarterly Cost Recovery Statement.

According to Ram, these are statements which the oil companies have to submit to the Minister, not to the Guyana Revenue Authority (GRA) or the Environmental Protection Agency (EPA) or some other imaginary person. And for good measure, there is the annual audit permitted under the Agreement. Ram said the only live oversight which the GRA exercises is in relation to imports which come under the Customs Act.

In an invited comment, Ram said, “The function of the revenue authority is to administer the tax laws of the country and that this in no way relieves the Ministry of Natural Resources from exercising strict oversight of the activities of the oil companies. There have been persistent calls for a Petroleum Commission but the Government refuses to see this as a priority…I thought this would have been so critical if we were serious about overseeing the management of the petroleum operations.” Be that as it may, the Attorney-at-Law insists that the government has the opportunity when it receives statements under the agreement to raise questions immediately. “That is the real-time monitoring it can do, but which it is either unwilling or unable to do. It has the authority to do real-time monitoring, meaning, as we get it, we query it. It has a duty to do this instead of waiting until it is the auditing time.”

Former Finance Minister and Economist, Winston Jordan has also expressed the view that the country can do early tracking, querying and even disclosure of costs being incurred by ExxonMobil’s affiliate and operator, Esso Exploration and Production Guyana Limited. He noted for example that the country could know early on, what are the costs for the exploration wells before they are drilled. “This is something very basic that the country should know and be monitoring. It is also one of the pieces of information that should be part of regular reporting to the National Assembly.”

Trinidadian Energy Strategist, Anthony Paul who is also very familiar with Guyana’s oil discovery and production history since 2015, noted that the country has the power to request co-management documents among the joint venture partners. “The Joint Operating Agreement indicates how the parties make decisions, authorize projects, spending, budgets, etc and keep and share information. Governments typically request and get access to this. As for real time monitoring, modern large firms and governments employ Enterprise Resource Planning (ERP) software systems to integrate and manage their day-to-day activities, such as accounting, procurement, project management, risk management, compliance and operations. This can be customized and it also allows for access to or reporting to partners, suppliers and regulators on a real-time basis.”  It was about two weeks ago, Kaieteur News had asked the Vice President, Dr. Bharrat Jagdeo to say what mechanisms are being utilised to ensure real-time monitoring of costs being racked up by ExxonMobil which is now pursuing the development of its fourth project, Yellowtail. Jagdeo said, “Right now, the contract provides only for audit and it’s a post process.  If you have to be involved in real-time monitoring, it means co-management; that’s the only way that Guyana will be managing the oil company, that’s the only way you can deal with it now in real time. We don’t have co-management that is why there is a mechanism that provides for the audits.”

Should the audits find unreasonable costs or those procured through insider trading or related companies at inflated costs, Jagdeo said those could be disallowed. If successful, the VP said they have to be removed from cost oil and therefore result in a higher share of profit oil. He said however that there is no co-management arrangement and therefore Guyana is left only with the audits.

In May last, the Guyana Government had signed a contract for a four-month review or audit of ExxonMobil’s expenses between the years 2018 to 2020. Importantly, the audit will cost Guyanese some US$751,000.

This is a discounted price from the US$1 million that was being sought by the consortium to undertake the review. 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. The country is still to see the outcome of the audit conducted on the US$460M pre-contract costs incurred by Exxon pre-2016. That audit was undertaken since 2019 by IHS Markit. The contract with the UK firm had cost US$300,000.

 

 

 

 

 

 

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