Former Ambassador calls on Govt. to sanction Exxon for abuse of Guyana’s oil profits

Nov 08, 2023 ExxonMobil, News, Oil & Gas

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– says such lawlessness would be met with stiff financial penalties in the US

Kaieteur News – Former Guyana Ambassador to South Africa, Dr Kenrick Hunte has called on the government to put systems in place to sanction ExxonMobil if it abuses this country’s profits as was revealed in the audit of the US$7.3 expenses of the oil giant.

Dr Hunte’s comments come even as this newspaper continues to expose revelations from the second audit report on ExxonMobil Guyana Limited’s expenses, which uncovered 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 addition to using revenues from the Stabroek Block to fund works in other blocks, the audit also uncovered countless instances where the oil company used Guyana’s profits on activities totally unrelated to oil production. These include puppet shows for Exxon’s staff and their families dance classes among others.

Vice President, Bharrat Jagdeo when asked to comment on this issue would only say 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 unauthorised work you don’t go to jail according to PSA it just doesn’t form part of the cost bank,” the VP said.

In a letter to the editor in today’s edition, Professor Hunte in referencing the work done by the consortium of auditing firms, Ramdihal& Haynes Inc., Eclisar Financial, and Vitality Accounting and Consultancy Inc., with backing from Martindale Consultants, said numerous unauthorised expenditures that have inflated the costs of the ExxonMobil Guyana Limited financial statements were uncovered.

In particular, Hunte said the auditors point out the unlawful disbursement of funds from the Liza 1 and 2 revenue streams for activities in the Kaieteur and Canje blocks, as well as other expenditures not related to the extraction of oil from Liza 1 and 2. “This dishonourable action by EMGL signals the utter contempt EMGL has for Guyana,” the former ambassador stated.

He said that EMGL would not engage in this behaviour in the USA, where financial penalties would unreservedly be imposed by the appropriate government department. As such he questioned whether  this unprofessional behaviour will continue on future projects in the Stabroek block, given that EMGL claims that they have invested US$50.00 billion dollars.

He also asked whether the auditors have access to the EMGL financial documentation in real-time, not years later, so that this deceitful behaviour can be terminated before it impacts Guyana share of total revenue.  Also, Hunte questioned whether going forward, can a simple system be commissioned in real time of counting barrels so that Guyana can receive its fair and equitable share. “This approach of counting barrels will establish a transparent system that is currently lacking; it will not violate ‘the supposedly inviolable contract sanctity cause of unending serfdom of Guyana’; and moreover, this approach will allow the full breakeven level of output to be determined and the correct profit level to be derived. Incidentally, the current 75 percent of total revenue that is allocated as total cost is a fake cost measure, since it violates the elements that are included in a cost function.”

The Ramdihal& Haynes Inc audit report 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.

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• Bharrat Jagdeo, Dr Kenrick Hunte, Former Guyana Ambassador, South Africa, Vice President

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