Audit to scrutinise Exxon’s costs for drill ships, supply boats, helicopters, lease for FPSO’s – Jagdeo

Nov 04, 2023 ExxonMobil, News, Oil & Gas

---

…says exercise will not only look at costs, but fair-value

Kaieteur News – With the field work for two audits completed, one by the British Company Information Handling Services (IHS) Market, into the US$1.7B of expense incurred from 1999-2017 and another done by a local consortium to scrutinize the expenses for 2018 to 2020, a lot of jaw-dropping revelations have been made. Some of the expenses incurred were totally unrelated to oil production, but rather to benefit Exxon’s expatriates and their families.

However, some of the bills which have not been seen are related to the costs for drill ships, supply boats, helicopters, and lease for FPSO’s and maintenance, all of which were needed to facilitate the exploration for and production of oil. On Thursday at his weekly press conference, Vice President Jagdeo was asked if his government can provide the costs for the above listed expenses. He said that: “those will be looked at in terms of whether they are fair value in the audits. Whether we have achieved fair values you will see in the audit report now and the audit report will look at cost.”

He went on to say that it will be “not just cost from a perspective of whether there was any illegality done but cost in terms of fair value so when the audit reports come out we address it through that mechanism.”

It is important to note that the audits done were not forensic audits but cost recovery audits. Financial Analyst and Certified Accountant, Floyd Haynes during an interview late last year on Kaieteur Radio’s Programme, Guyana’s Oil and You explained that “A forensic audit is done with the aim of identifying fraud and embezzlement with the goal of gathering evidence to be used in a court.” On the other hand a cost recovery audit is being done pursuant to the parameters of the 2016 Production Share Agreement (PSA) governing the Stabroek Block.

“The goal is to verify the accuracy or rather the legitimacy and validity of cost claimed…There is a huge difference so I wanted to clear that up,” he said. Haynes said that Guyanese can rest assured that no stone was left unturned by Auditors involved in the examination of ExxonMobil’s costs incurred in the Stabroek Block. This publication has carried several articles on the audits from the moment the contract was awarded. In one article Haynes had said that he did not want the audit to be viewed as a “witch hunt” or a “Got You!” exercise, further stating that, “You cannot convict someone without a trial and no serious professional will litigate something this complex in the news media without first having seen the audit or looking at the costs or any of those things. I think it’s reckless and rather irresponsible…” Haynes added, “I can assure our Guyanese that no stone will be left unturned, we will look at everything and we are doing this on behalf of the Government and ultimately on behalf of the Guyanese people but at the same time we don’t walk into an audit assuming that the company is guilty.”

THE AUDITING PROCESS

The Certified Accountant was keen to share with the public how the audit process worked. Exxon first had to provide them with a Joint Audit Data Exchange (JADE) report which contains all of Exxon’s costs claimed as part of their cost recovery. According to the account this contains tens of thousands of lines of transactions. “There is no Auditor in the world that can sit down and go through all of it. In fact, no audit is ever done that way.” Haynes said Auditors take a representative sample, rather, a scientific sample of the costs incurred and that sample is based on a number of things. “It could be high risk areas that you think have potential for exposure based on past experience or based on having done work in the industry before. So you take a sample of those, you look at it closely and then you ask for corroboration or additional information on those types of things and that’s what we did,” said the Auditor.

He added, “Out of that you will have findings, you will write up your report, and give it to the Government, from there, the Government will engage Exxon in some kind of a discussion, it will go back and forth, and we will probably go back and then produce a final report. That’s kind of the process in a broad way.”

Haynes said he always knew the level of complexity would be high. “But having done lots of audits before, I think this one takes the cake in terms of the degree of complexity. These spreadsheets you’re looking at are so huge you have to run pivot tables, you’ve got to chop it in slices and dices.” Haynes said the greatest takeaway for him, is understanding that this kind of work really requires a high level of expertise in order to be able to perform. He said Guyana does not have this. The Fraud Examiner believes that the partnership with the international consortium will help in providing the knowledge transfer that will, over time, allow locals to eventually conduct similar audits. He said too that he has developed a healthy appreciation for the amount of effort that must go into such exercises.

IHS Market, a British firm, was contracted back in 2019 to audit over US$460M in costs incurred by Exxon. The bills are supposedly for exploration and administrative costs incurred prior to oil being discovered in 2015.  It was also responsible for auditing a portion of costs incurred from 2015 to 2017 but there has been no official confirmation of what this amount is. Government has also not given a definitive statement on the status of this exercise. President Irfaan Ali has since pledged to make these reports public, in keeping with his desire for transparency and accountability in the oil and gas sector.

---

• Bharrat Jagdeo, Financial Analyst and Certified Accountant, Floyd Haynes, Vice President

---