GRA challenges British auditor on accepting 50% of Exxon’s bills with related companies

Apr 13, 2023 News

– says greater effort needed to protect Guyana’s interests – Report

Kaieteur News – A team comprising some 20 technical officers from the Guyana Revenue Authority (GRA) and the Natural Resources Ministry has been working behind the scenes to ensure the country’s first audit report on expenses in the Stabroek Block captures every unsound financial practice.

To ensure no stone is left unturned, the local team led by GRA is meticulously reviewing the audit findings of IHS Markit which was hired in 2019 to audit US$1.6B in costs incurred by ExxonMobil affiliate, Esso Exploration and Production Guyana Limited (EEPGL) and its partners, Hess Corporation and CNOOC Petroleum Guyana Limited.

One of the key findings under discussion between IHS and Guyana’s technical team pertains to bills Exxon racked up with related companies. According to a letter seen by this newspaper, IHS accepted more than 50 percent of the related party costs on the grounds that there was “adequate documentation provided.” Those intercompany costs total US$48.4M.

Guyana’s technical officers, specifically those at GRA, were keen to note that more effort should have been done on the part of IHS.

The team said, “There was no further probing of these related party transactions to verify that there were no major transfer pricing issues that would lead to the unjust inflation of costs which would ultimately be borne by the Government and people of Guyana. Once again, there needs to be thorough verification of related party transactions to ensure that these transpired at ‘arms-length’.”

IHS in its March 11, 2021 report was keen to note that while it is a firm of international repute, the audit it was asked to do was not without challenges. It said any audit relies on acquiring a complete set of information, in this case from EEPGL and the respective Government of Guyana (GoG) agencies. IHS said, “Data gathering for this audit has been particularly complex and challenging as information is spread over 18 years, across multiple systems and GoG agencies. Essential data to complete this assignment required input from multiple stakeholders in Guyana, namely: Esso Exploration and Production Guyana Limited, Guyana Geology and Mines Commission, Department of Energy, Guyana Revenue Authority.”

The British auditor further noted that all parties were actively involved in providing the requested information, although it has taken stakeholders materially longer to respond to requests for information than anticipated.

It further noted that the data gathering and discovery stage required EEPGL to maintain open and transparent records. As part of the data gathering process, it said templates were developed to capture key information regarding wells, SURF (Subsea, Umbilical, Risers, Flowlines), support infrastructure, procurement processes, vendor contracts, expenditure records, invoices, field development plans, payroll and time writing records.

Kaieteur News understands that these templates can be used to establish precedence for future audit requests.

During the data gathering stage, the international auditor said regular meetings were held with EEPGL in order to discuss data requests and seek clarifications of the answers.

It is now more than three years since the audit of US$1.6B in expenses for the oil-rich Stabroek Block is yet to be completed. Commissioner General of the Guyana Revenue Authority, Godfrey Statia said recently that government is now at the stage of awaiting feedback from Exxon’s subsidiary.

Statia did not provide a timeline for when this process would be completed, but assured that the document will be made public at the appropriate time.

A second audit is currently underway for costs totalling US$7.3B which were incurred from 2018 to 2020. That contract was awarded last year May. That too is still ongoing.

CNOOC Petroleum Guyana Limited, Esso Exploration and Production Guyana Limited (EEPGL), Hess Corporation, IHS Markit, team

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GRA challenges British auditor on accepting 50% of Exxon’s bills with related companies

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