VP Jagdeo loses temper when questioned on ExxonMobil’s US-multibillion $$$ expenses

Aug 20, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – Vice President, Bharrat Jagdeo during a media engagement at the Arthur Chung Conference Center (ACCC) on Thursday lost his temper when questioned by a Kaieteur News reporter on releasing the Cost Recovery Statements and forecast of expenditure by the ExxonMobil-led consortium, developing the resources in the oil-rich Stabroek Block.

So far, ExxonMobil has recovered US-billions in costs related to oil production. Last year alone, the company reported that a whopping US$7.4 billion in expenses were cleared through Guyana’s oil. This was over five times the revenue Guyana earned during the same period which totaled a meager US$1.4 billion.

The Production Sharing Agreement (PSA) Guyana signed with Exxon and partners allow for 75 percent of the revenue to be deducted each month towards the recovery of costs. This means Exxon is repaid a handsome sum of the proceeds each month towards recouping its investment.

In the absence of a ring-fencing provision, the deal sees Exxon recouping costs from an oil producing project to pay for expenses unrelated to that specific development. For instance, last year the two producing fields, Liza One and Liza Two generated revenue that paid for the decommissioning (cleanup) costs for the third and fourth oil projects- Payara and Yellowtail- which are yet to commence oil production.

Vice President, Bharrat Jagdeo responding to Kaieteur News during his Thursday press conference

Importantly, the government has been failing to conduct and complete timely audits of the company to verify the expenses being claimed by the Stabroek Block partners. In the meantime, the co-venturers continue to rack up expenses unrestricted, since Vice President Bharrat Jagdeo previously made it clear that in the absence of a “co-management arrangement” Guyana is restricted to merely checking the bills after they have been submitted. Notably, the lopsided oil deal with Exxon requires the oil companies to furnish the Guyana Government with various documents on their expected expenditure for a given year. They are also required to provide details on how much of their investment has been cleared off using Guyana’s oil.

Annex C of the contract which outlines in detail the accounting procedures Exxon must comply with states that the Contractor shall prepare an annual budget pursuant to Article 7 of the Agreement that will distinguish between Exploration Costs, Development Costs, and Operating Costs. The statement must also show a forecast of expenditures and receipts under the Agreement for the calendar year as well as cumulative expenditures and receipts to the end of the said calendar year.

This publication has reported that several industry stakeholders have called for the foregoing to be in the open to deepen the public debate on how the nation’s oil resources have been and would continue to be utilized.

Cost Recovery Statements

It is in this regard that the VP was asked on Thursday to say whether these statements can be made public. This is the second for this year the question of the Stabroek Block expenses have been put to Jagdeo, who is tasked with managing the petroleum sector.

In March, Jagdeo said he was comfortable releasing the statements since he believes Kaieteur News would “nitpick” and “lie about it”. He nevertheless noted that “we are open to exploring it and seeing what more could be done.”

During his press conference on Thursday, the VP was reminded of his commitment and was asked whether he had arrived at a conclusion regarding the release of the cost recovery statements especially.

(From 2:14:43)

The query noticeably caused the chief policy maker to become annoyed. In his response, he said, “What is it that you want about the financial statements because I pointed out that Kaieteur News couldn’t read the financial statements so what did I say? What further?”

He was reminded by a Senior Journalist from this publication that he explained before that this request would be explored, however he articulated: “but they are in the Court documents that you have, it’s just that you couldn’t read it, not you, but Kaieteur News whoever wrote that article couldn’t read a financial statement. It’s in the Court document already.” ExxonMobil’s Cost Recovery Statements have never been attached in any Court document.

The Journalist also sought an update on whether the country has since managed to pay off the Liza Two development costs, to which he said he was not sure. This project was pegged at US$6 billion, however due to the lack of ring-fencing provisions this cost could still be pending.

In February this year, Country Manager for ExxonMobil Guyana, Alistair Routledge in response to a question from this publication revealed that the Liza One project expenses have been cleared.

He explained, “On Liza, it all goes into the same cost bank but we have now recovered cost that would be equivalent to the original investment for Liza Phase One.”

Routledge also pointed out that significant progress has also been made in terms of repaying the investment on the second deepwater project, Liza Phase Two. He could not state at that time how much of the expenses were paid off on the company’s second deep water project, but noted that these details would be included in the company’s upcoming financials.

Secrecy of Exxon’s US-multibillion expenses

The Vice President’s posture on this critical aspect of the country’s oil and gas sector would raise further concerns regarding the administration’s management of the industry. Already, the political Opposition has chastised the government for “drowning” the sector in secrecy.

In its Manifesto, the PPP said it would “ensure that expenditures are transparently determined and go through the Parliamentary process.” It is not clear whether this was specific to the expenses of oil companies or expenditure relating to the use of funds in the Natural Resource Fund (NRF). However, the Opposition believes this is a major letdown, as there is no transparency when it comes to any oil related expenses.

Economic Advisor to the Opposition Leader, Elson Low said, “The government’s refusal to release cost oil audits or to commit to a timeline for their completion and release also violates their manifesto promises since they said they would hold oil companies accountable and verify expenditures.”

Additionally, he noted, “There is a lack of specificity as to what exactly oil revenues are being spent on, which also violates their commitment to transparency.”

He was referring to the circumstances under which revenue from the oil and gas sector is being transferred to the public purse without a clear outline of what “national development priorities” are being funded through that source.