Exxon will face no punishment or consequence for illegally using Stabroek Block revenue for other blocks

Oct 30, 2023 News

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Kaieteur News – ExxonMobil Guyana Limited will face no punishments for its unauthorized use of profits from the Stabroek Block to finance work for the Kaieteur and Canje blocks Vice President Bharrat Jagdeo said on Thursday as he maintained that the company had acted illegally when it used profits from Stabroek block to finance work on the other blocks.

Last week, Kaieteur News reported that 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.

However, while speaking at a press conference on Thursday, the VP simply told reporters that the oil company will face consequences.

When asked to expound on the consequences, Jagdeo only said that the contract that the oil giant signed with Guyana means that the expenses will not be included in the cost bank for the Stabroek Block.

“I maintain my position that it would be illegal and I repeat that. The audits would have revealed that now and as I said before there will be consequences. If you did unauthorized work you don’t go to jail according to PSA it just doesn’t form part of the cost bank,” the VP said.

Earlier this month, an audit report—drafted by a local consortium Ramdihal & Haynes Inc., Eclisar Financial, and Vitality Accounting & Consultancy Inc. and bolstered by the international support of SGS and Martindale Consultants—gave 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.

Kaieteur News reported that as a result of the five instances in which the oil companies acted in violation of the contract, auditors insisted that the Stabroek Block account be reimbursed with US$3,812,653.

In the first instance, the report states that Exxon used the 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. The auditors contended 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.”

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 urged Exxon to return US$1,391,902 to the Stabroek Block account.

Meanwhile, the second audit report on ExxonMobil Guyana Limited’s expenses totalling US$7.3B has exposed how the company brazenly used Stabroek Block profits to pay for drill ship expenses related to two separate and distinct blocks—Kaieteur and Canje.

In this case, the auditing team found that Exxon had four drill ships from Noble Corporation working during early 2020. However, the COVID-19 pandemic made staffing all four vessels challenging. Auditors were informed that Exxon took the decision to suspend the services of the Stena Carron drillship and the Noble Tom Madden and move them closer to shore into a “hot standby” (idle but still operational) mode until the staffing issues could be alleviated.

In the case of the Stena Carron, auditors said records show Exxon had Stena on standby to execute works for Stabroek as well as Canje and Kaieteur which it walked away from this year.

Records show that Exxon had the Stena Carron drill ship drill the Tanager-1 well in the Kaieteur Block beginning September 9, 2020 and ending November 23, 2020. Stena was then moved to the adjacent Canje Block where it worked on the Bulletwood-1 well which began December 31, 2020 and ended March 2, 2021. Stena was also used to drill the second well in Canje called Jabillo-1 which began on March 12, 2021 and ended March 20, 2021.

 

 

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• Guyana, Kaieteur and Canje blocks, oil, Stabroek Bloc, Vice President Bharrat Jagdeo

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