‘Oil audits must verify Exxon’s spending’ …Opposition says Guyana must be able to identify shell companies, overspending

Sep 29, 2022 News

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Kaieteur News – The tricky business of verifying petroleum expenditures from the Stabroek Block operator remain and the Parliamentary Opposition is keen on examining government’s treatment of this issue.

In the absence of several mechanisms to ensure Guyana’s robust oversight of oil and gas production cost, the Parliamentary Opposition says it is eager to see how the government would have been able to confirm not just the numbers, but the way in which these expenses would have been incurred.

Opposition advisor and Economist, Elson Low is adamant that verification of cost oil to Guyana remains a serious issue, as this is the way the country will ascertain whether or not it is overpaying oil companies for the development of the oil resource. With the cost recovery audits for 2018 to 2020 deadline ending this month, Low said the opposition is also expecting that the findings will be made public.

The opposition official told the Kaieteur News that if the government does not make the audit public “…we will be demanding that we have access to it in Parliament and at the very least the public accounts committee; but we will be demanding access to the audits so we can inspect it,” Low confirmed. He said that the opposition already has an idea as to what it will be looking for; “…and that is whether the audit was able to flag any unusual expenses or any unusual transactions, especially those with related authorities and so on.” Low explained that the problem for Guyana is that the oil companies can say that they spent certain amounts of money, “but we must audit in such a way to find out if that is the truth.” He continued that, “the reason for the audit is to identify whether or not there are any discrepancies. So, the point here is just saying that you audited is not good enough; we want to actually see the audit to inspect the audits to see whether or not it has identified anything.” And if the audit has not identified anything, then it is time to consider whether there is a need for concern, Low suggested.

He continued that as much as the oil company spending could be audited, what remains important is to verify that what they have recovered as cost oil was not done through unscrupulous avenues. “…so, ultimately, for example, if they are using a shell company to inflate cost, if they tell us one thing, we have no way of knowing if they are telling the truth or not without verifying the audits.” Low reiterated however that the audit should be released to the public but noted too that the public accounts committee is also a staple location to have the information scrutinized so to mitigate any disclosure issues if any should arise. Low said that the examination of the audit will allow stakeholders to ascertain not only the spending habits of the oil companies, but it will disclose whether Guyana was well able to protect itself from overpaying costs and other possible operational misdeeds by the oil operator.

In May, when the Natural Resources Ministry signed a contract with a consortium of Guyanese auditors to the tune of some US$751,000 to conduct a cost recovery audit of ExxonMobil’s post-2017 (2018-2020) expenses, it said that the exercise will be completed before the end of this month. Ramdihal & Haynes Inc., Eclisar Financial, and Vitality Accounting & Consultancy Inc. with support from international firms – SGS and Martindale Consultants, were hired. With just a day left in the month, there has been no update on the position of the audit.

Guyana has a contractual two-year timeline to ensure the audit of expenses handed down by oil partners operating in its offshore Stabroek Block. In the past, Guyana has been hit with some delays in assessing the fairness of these development sums, attributed to a lack of capacity by local companies to ensure the relevant checks and balances. Guyana had completed an initial oil expense audit up to 2017, following which the government registered some issues regarding the expenditure. When he spoke on this matter in April, Vice President Bharrat Jagdeo opted not to give details but informed that there was an active process pursuing those expenditure disagreements. Despite the two-year timeline for discrepancy claims, both the Vice President and the Minister of Natural Resources Vickram Bharrat has given verbal assured that Exxon will engage the government on disputed costs.

So far, Guyana is looking at an over US$30B oil expense bill. Apart from the more than US$400M pre-contract exploration figures, Guyana has a US$10B sum from its on stream Liza 1 and 2 wells, while US$9B is slated for the upcoming Payara field and US$10B Yellowtail development.

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