Govt. prepared to head to arbitration over US$214M costs - Jagdeo

Govt. prepared to head to arbitration over US$214M costs – Jagdeo

Oct 20, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – The Government of Guyana (GoG) has made it clear that it will not be engaging in any settlement with ExxonMobil over the US$214million in questionable costs flagged by British auditor, IHS-Markit.

Vice President, Bharrat Jagdeo

On Thursday, during his weekly press conference, Vice President Bharrat Jagdeo was asked by this newspaper whether government has considered settling the dispute with the oil giant given how tedious the process has been and the fact that Guyana will be required to cover the costs of Exxon’s legal defence.

To this end, Jagdeo informed that the GoG has been guided by two sets of advisors on the matter that have both recommended that the US$214M sum be returned to the cost bank. This means that the US$214M will be split as profits, which will allow Guyana to receive US$107M while Exxon will enjoy the other US$107M.

Consequently, Jagdeo asserted, “I don’t believe there is scope at this stage for settlement especially given the magnitude of reduction.” He explained, “Exxon is talking about moving from US$214M to US$3M and if we settle with that, then it’s only half of that we get and so those figures are not palatable at all.”

As such, the former Head of Stated noted, “We may have to go to arbitration.”

Meanwhile, he told reporters that government has not done an assessment of what the arbitration process would cost. He however pointed out that he believes this is the fittest method.

“Given all that has happened, I think you need an independent third party on this. If you settle on any figure, say US$214M with Exxon people will say oh you caved to Exxon, if you settle at US$3M, it is worse so a third party is needed to deal with all of these issues. We should not engage, I think, in any negotiations,” the VP said.

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. It reviewed the expenses of the company incurred between 1999 and 2017.

Following the leaked audit report, it was reported that the Ministry of Natural Resources engaged in an “unauthorized process” that saw the reduction of the questionable sum from US$214M to US$11M and then to US$3M.

The Ministry was forced to conduct an investigation which found that one of its officials, Senior Petroleum Coordinator, Gopnauth Bobby Gossai, engaged Exxon in reducing the disputed sum.

Government has since indicated that it will be adhering to the technical advice from the GRA regarding the audit.

The process of arbitration is required under the terms of the 2016 Production Sharing Agreement (PSA) with the Exxon consortium.

Annex ‘C’ of the PSA at Section 1.5 (b) states “…In the event that an audit claim by the Minister is not settled to the Minister’s satisfaction by the Contractor’s reply as provided for above, the Contractor shall be entitled to recover any disputed amounts pending final resolution of the claim…”

The agreement also states that Exxon can provide reasons justifying the costs, but government would have to head to international arbitration to reclaim these sums. Upon the resolution of the issue, Guyana would be repaid with interest, if the country is successful in its challenge. However, all the legal fees incurred for both parties would be borne by the state.

Guyana has agreed to submit its dispute to the International Centre for the Settlement of Investment Disputes (ICSID) for arbitration before three arbitrators – pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Research by this newspaper found that the institution was established in 1966 for legal dispute resolution and conciliation between international investors and States. It is parented by the World Bank Group.