Govt. blames Ministry Staff for reducing Exxon’s questionable bills from US$214M to US$3M

Sep 16, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – Minister of Natural Resources, Vickram Bharrat said yesterday that staff within his Petroleum Unit engaged in an “unauthorized” reduction of ExxonMobil Guyana Limited’s questionable expenses from US$214M to US$3M. He said members of the unit have since been instructed to cease such unethical engagements and to follow the lead of the Guyana Revenue Authority (GRA) on such audits.

In a statement to the media, the official recalled that the US$214M was initially flagged in an audit conducted by IHS Markit. The British company had examined ExxonMobil’s US$1.7B in expenses incurred in the Stabroek Block for the period 1999 to 2017. The company said the Guyana Government has reasonable grounds to challenge Exxon on US$214M in questionable expenses. That sum was subsequently endorsed by the Guyana Revenue Authority (GRA) which is charged with overseeing the country’s interest in these matters.

GRA had also via correspondence, informed the ministry that the audit should proceed to finality with the US$214M figure as the final sum of disputed costs with Exxon. Minister Bharrat said his staff subsequently engaged Exxon in discussions, where the costs were later reduced to US$11M and then to US$3M. That information was then fed to Minister Bharrat and Vice President, Dr. Bharrat Jagdeo as though it emanated from GRA. Minister Bharrat said he later learnt that this was not the case.

The Minister said that upon learning of what staff within his Petroleum Unit had done, “corrective action was taken immediately and staff was instructed to cease such engagements and deliberations.”

Minister Bharrat categorically stated that GRA is “the competent authority to lead all audits for expenses incurred by ExxonMobil Guyana Limited and other oil companies.”

Minister Bharrat’s statement on the matter followed comments by the Vice President, Dr. Bharrat Jagdeo during a press conference on Thursday afternoon. Dr. Jagdeo expressed grave disappointment in what had occurred and emphatically stated that the government will stand by the GRA’s no-objection.

The Vice President said, “I thought GRA was dealing with this matter totally because that is what we said… that GRA should deal with the issue of the audit. They should have a final say at the technical level. I was reluctant to even speak about it because I said it is being handled technically.”

The official said he understands there was no great discussion between the ministry’s staff and Exxon. Be that as it may, he said, “They shouldn’t have even entertained that. So my position still stands, I will go with what GRA has. I told [GRA Commissioner General, Godfrey] Statia, you will deal with it directly and not the ministry any longer,” the Vice President said.

He added, “I am very disappointed because we said all along that we must be guided by the technical people…”

The Vice President said clearly that there is a disagreement on the costs and now the next step is arbitration.

The audit of US$1.7B in Exxon’s expenses for the oil-rich Stabroek Block has taken more than three years to be completed. IHS was hired back in 2019 by the former David Granger administration to do the exercise. The auditor’s leaked report states that “the Government of Guyana has reasonable grounds to dispute US$214.4 million plus associated overhead adjustments of the costs…”

Further, the report states that the disputed costs fall into three main categories, the first being “Defined Costs for Removal” which amount to US$34.4 million. The report states that these costs have either been included in error, are not aligned with provisions in the Stabroek Block Production Sharing Agreement, are not related to petroleum operations, or are considered to fall outside of industry best practice.

The next category is “Inadequate Supporting Documentation” which totals US$179.8 million. The British auditing team said these costs suffer from a transparency issue as the cost basis, nature and justification of these costs could not be established with the furnished documentation even after several rounds of documentation requests from the Audit Team. Although these costs may be valid, the auditing team said government has the right to the transparency of how these costs relate to Stabroek Petroleum Operations.

The final category pertains to costs for which ministerial approval is required. This is to the tune of US$270,000. The report states that these costs have been identified as predominantly related to research and development and require ministerial approval before they can be considered cost recoverable.

Auditors also flagged a total of US$28.8 million which was incurred prior to date of January 10, 2015 when Hess Corporation and CNOOC Petroleum Guyana Limited even became partners in the Stabroek block alongside Exxon.

Following GRA’s no-objection to the US$214M figure, authorities are expected to proceed to finalizing the report.

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• Dr. Bharrat Jagdeo, Minister of Natural Resources, Vice President, Vickram Bharrat

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