'Submit Exxon’s quarterly expenses to Parliament for scrutiny'

‘Submit Exxon’s quarterly expenses to Parliament for scrutiny’

Jan 05, 2023 News

…while nation awaits delayed audit report – Opposition tells Govt.

Kaieteur News – Government’s failure to complete the audits pertaining to ExxonMobil’s affiliate Esso Exploration and Production Guyana Limited (EEPGL) expenses and to update Guyana on its financial position within a timely manner is a clear indication of the country’s inability to monitor its oil proceeds, Opposition Economist Elson Low has said.

The advisor to the Leader of the Opposition has described this inability as “very alarming” and has thus urged the government to submit all the company’s quarterly cost recovery statements to Parliament. He said that the government to date, has failed to publish the cost oil audits, reiterating the dire need to get Parliament involved in the monitoring of the oil expenses.

Opposition Economist Elson Low

Low agreed that there are ways to keep abreast with oil company expenses ahead of the annual audits, but noted that government is failing to build capacity in the relevant agencies, while keeping parliamentary oversight at bay. He noted that one way eyes could be kept on Exxon’s expenses is by accessing the company’s cost recovery statements that are provided for in Section 8 of the 2016 Production Sharing Agreement (PSA) which says that the Stabroek Block operator “shall” prepare each quarter of the year the cost recovery statement. The statement, according to the PSA would detail among other things, recoverable contract cost for the quarter, recoverable contract cost carried forward, contract cost recovered for the quarter and the quantity and value of cost oil taken and disposed for the quarter. The operator is required to submit the quantity and value of the cost oil taken and disposed of as well as the contract cost recovered for the quarter, in separate statements for each field so as to indicate the total allocation of cost oil as required by Article 11 of the agreement which focuses on ‘cost recovery and production sharing’.

“The cost recovery statement should be reviewed by the Public Accounts Committee (PAC) in the same way the audit should be reviewed by the Public Accounts Committee,” Low told the newspaper. He opined that the statements are meant to give Guyana insight into the recoverable 75 percent cost oil, before the actual audits take place. He added that to further support the annual audits, the opposition has called for increased local capacity to manage and audit the sector, as well as parliamentary oversight, as another layer. “We repeatedly called for capacity building especially in the area of auditing so we can better assess expenses on a short-term, regular basis, even while we have comprehensive audits from time to time. Parliamentary oversight is an additional lever. All these mechanisms can be leveraged to ensure Guyana benefits fully from its oil resources.”

The Opposition Economist noted that he is aware that the Guyana Revenue Authority (GRA) has commented as being empowered to keep track of the sector but as it relates to Guyana actually being protected from exploitation by the oil companies, “…we’ve not seen the government speak on that issue in a way that gives us any confidence,” Low related. He recalled that the previous administration had put into the pipeline work toward a petroleum commission that would have taken lead role in all aspects of the oil industry and would be responsible specifically, for the management of the sector. The petroleum commission would have been the ‘go-to agency’ for things petroleum and its contents relayed in Parliament. However, where oil industry finances are concerned, Vice President Bharrat Jagdeo is the government point person on the matter.

In the short run, Low said, it is a matter of taking Guyana’s oil finances seriously because “the government is simply not serious about auditing Exxon.” He said that citizens must become aware of the importance of auditing Exxon correctly and on time if the country wishes to come close to its true share of oil wealth. “We must, as a nation, come to understand that expenses that are incurred in oil development and production need to be monitored as closely as expenses that come from building roads. As a result, building our auditing capacity and oversight mechanisms is critical to national development.” He opined therefore that “Not auditing Exxon on time, and then potentially delivering a flawed audit, as well as failing to build auditing capacity are all government failures. And as I have said before, some of these things should be criminal offences.”

In a letter to the editor yesterday, Low said that the People’s Progressive Party (PPP) government seems to be struggling with the challenges that come from natural resource windfalls like discovering oil. He suggested that the delayed audit is an example of the government’s inability to cope with the changes as they are yet to say also, whether auditors of Exxon’s cost oil expenses are tasked to identify whether or not costs have been inflated and the country is being robbed billions of dollars.

As it relates to Parliamentary oversight, Opposition Members have argued against the limited number of times the House meets, the dormant natural resources sectoral committee, the increase of persons for the PAC which increases difficulty in having a quorum due to absenteeism and the reduction of the oversight layers that was placed in the now Natural Resource Fund. The Opposition, A Partnership for National Unity and the Alliance For Change has both accused the government of weakening and in some cases, ignoring state institutions that handle oversight of public funds.

Guyana’s current audit entails some US$7B. The pre-contract cost totals around US$460M.