Audit Report reveals ExxonMobil’s barefaced use of Stabroek Block revenues to cover expenses in Kaieteur and Canje Blocks

Oct 20, 2023 ExxonMobil, News, Oil & Gas

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EXXONM EXPOSED!

By Kiana Wilburg

Kaieteur News – The second audit report on ExxonMobil Guyana Limited’s expenses has found that during the period 2018 to 2020, the oil giant engaged in a brazen use of revenues from oil-producing projects in the Stabroek Block to cover expenses related to two other blocks—Kaieteur and Canje.

In the report—drafted by a local consortium Ramdihal & Haynes Inc., Eclisar Financial, and Vitality Accounting & Consultancy Inc. bolstered by the international support of SGS and Martindale Consultants— there was a meticulous breakdown of five instances where the Stabroek Block’s financial resources were used for Kaieteur –a block Exxon walked away from this year –as well as Canje.

In the first instance, the report states that Exxon used Stabroek Block revenues to cover a permit fee for a Kaieteur Geotechnical and Geophysical Survey. When auditors made this discovery and roasted Exxon for such a flagrant violation of international best practices, Exxon agreed that it should not have occurred. As a result, auditors asked that the US$16,039 used to cover that survey be returned to the Stabroek Block cost bank. Auditors said this was done in October 2022.

In the second instance, auditors found that Exxon included its cost recovery statement for the Stabroek Block, 100% of the costs associated with an Emergency Response Study for oil spills from Guyana wells. Auditors said the Stabroek Block revenues should not have been used to cover 100 percent of this activity since the study looked at wells in the Kaieteur and Canje blocks. Auditors said Stabroek’s share should have been 50% of the cost or US$ 32,575 while Canje’s share should have been 25% or US$16,287.64 and Kaieteur’s share 25% or US$16,287. Exxon was therefore asked to return US$ 32,575 to the Stabroek Block’s account.

In the third case, auditors said Exxon charged the Stabroek Block’s producing projects, 100 percent of the cost for various vehicles. Auditors said these vehicles were purchased in support of all the operator’s Guyana operations, not just Stabroek, hence the costs have to be allocated to all blocks. Auditors said they were verbally advised by Exxon that the 100 percent charge to Stabroek was proper because, paraphrasing, “the reason the contractor was in the country was because of Stabroek operations.”

Auditors said they argued against such a perverse reasoning. They said while the Stabroek Block may be Exxon’s major development at this point since 11 billion barrels of oil resources have been unlocked, the oil giant still explored for oil in Kaieteur and Canje where additional exploration activities are planned. The auditors contended therefore that since the vehicles are also used to support activities related to the Kaieteur and Canje Blocks, Exxon must return US$404,285 to the Stabroek Block account.

In the fourth case, the auditors said Exxon charged the account of producing Stabroek Block projects, 100 percent of the renovation costs for Exxon’s Duke Street office, including upgrades, furniture, and setup costs. Auditors reasoned that Exxon operates all of its Guyana operations out of the Duke Street office, so charging 100% of the more than US$6 million of renovation costs entirely to the Stabroek Block’s account “is patently inequitable.”

Auditors further explained that basic accounting rules hold that capital costs for assets that benefit multiple properties should be charged to the benefitting properties based on usage or other metric over time. “Under no circumstance should one property bear 100% of the capital costs simply because it was the first property developed, because it is larger, or because it is ‘more important’ than others,” auditors said as they insisted that the Stabroek Block account be reimbursed with US$3,812,653.

In the fifth case, auditors found that Exxon charged the account of producing Stabroek Block projects 100% of the costs from Environmental Resources Management, ERM Guyana, and RPS Group for various studies on the impact of oil and gas operations on fish, bird, and turtle migrations, habitats, and survival. Auditors specifically stated that Exxon should have applied a 75% cost allocation for the studies to Stabroek and 12.5% each to Canje and Kaieteur. Auditors therefore urged Exxon to return US$1,391,902 to the Stabroek Block account.

Overall, the five cases show that Exxon used US$5.6 million in Stabroek Block revenues to cover expenses that ought to have been applied to the books for the Kaieteur and Canje Blocks.

The report with these damning findings is currently being reviewed by the relevant authorities.

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• Eclisar Financial, ExxonMobil, Kiana Wilburg, Ramdihal & Haynes Inc., tabroek Block

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