AFC: Audit of Exxon US$1.6B pre-contract costs stalled but 6th project on horizon

Sep 16, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – Still struggling to complete an audit of ExxonMobil Guyana Limited’s (EMGL’s) US$1.6 billion expenses incurred between the period 1999 and 2017, the Government of Guyana (GoG) has entertained an application by the operator of the Stabroek Block for a sixth project.

Equating the management of country’s burgeoning petroleum sector to that of spending by drunken sailors was the Alliance For Change (AFC) Executive Member, Dr. Vincent Adams, in an interview with Kaieteur News yesterday.

He shared this view following a press conference at the AFC’s head office, Railway Embankment, Kitty, Georgetown. During the media engagement, Opposition Members of Parliament (MPs) shared their views on the recent disclosure that Guyana will have to go to arbitration to claim some US$214 million in disputed costs, flagged by an audit conducted by British Consultancy group, IHS-Markit.

He explained, “To say the government is running this oil sector like a cake shop operation would be unfair to cake shop operators. Basic project management principles call for detail planning with “what if” scenarios to identify risks and address them as they surface.”

Dr. Adams, a Petroleum Engineer who previously served as the Executive Director of Guyana’s Environmental Protection Agency (EPA) was keen to note that government must consider “what ifs” such as debt ceilings and available cash flows to manage projects in a long-term strategic manner.

He said, “To add to the problem, there is no such long-term strategic planning to link oil income with national expenditures or investments with carefully planned scheduled projects based upon the cash flows.”

As such, Dr. Adams equated the approval of projects in the Stabroek Block to spending like drunken sailors. “All we are doing is spending money not in hand like drunken sailors on projects that randomly come to mind without any thought behind it to satisfy the politicians’ whims and fancies and fill their families and friends’ pockets,” he argued.

The former EPA head pointed out that while Guyana is wasting a lot of its revenue on servicing the debts for these loans, ExxonMobil and its shareholders are fattening their bank accounts and enjoying luxurious lives while Guyanese continue to struggle to put meals on their tables.

On Thursday, Vice President Bharrat Jagdeo revealed that government unequivocally supports the Guyana Revenue Authority’s (GRA) identification of US$214M in questionable expenses racked up by ExxonMobil for the Stabroek Block. He also noted that the government will utilize arbitration to settle the claim.

The US$214M figure was first flagged by the Consultancy Group, IHS Markit. That audit was awarded since September 2019 by the former Coalition administration.

In the meantime, a separate audit conducted by VHE Consulting for the ‘Cost Recovery Audit and Validation of the Government of Guyana’s Profit Oil Share’ between the years 2018 to 2020 is still ongoing. The contract for the US$7.3 billion costs was awarded in May 2022.

Be that as it may, Jagdeo at a Local Content Summit in April this year indicated that government intends to keep the industry on the fast track for a minimum of 15 years so that investors, both local and foreign, will have enough time as well as a thriving business environment to recoup their investments.

The Guyana Government has already sanctioned two additional oil projects, namely the Payara and Yellowtail developments which will use the Prosperity and ONE GUYANA Floating, Production, Storage and Offloading (FPSO) vessels respectively. The Yellowtail Project costs US$10B and is expected to come online in 2025 with a production capacity of approximately 250,000 gross barrels of oil per day.

Exxon was granted approval for its fifth project at the Uaru field in the Stabroek Block late April 2023 with an application for the sixth at the Whiptail discovery now pending. Uaru which is expected to come online at the end of 2026 at a cost of US$12.5B will have a gross production capacity of approximately 250,000 barrels of oil per day, while Whiptail- the largest offshore development yet-is pegged at US$12.9 billion.

The cost for the five projects sanctioned to date costs almost US$40 billion that is still be verified, however, government is looking to approve a sixth development.

According to the AFC, “That’s not the way to even manage a cake shop much less a nation’s finances.”

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• Alliance For Change (AFC), Dr. Vincent Adams, Executive Member, ExxonMobil Guyana Limited, Stabroek Block

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