‘Gov’t. must allocate resources in Budget 2024 to settle US$214M audit dispute with Exxon’- Opposition

Jan 08, 2024 News

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Kaieteur News – The Opposition has called on the Government of Guyana (GoG) to ensure resources are allocated in this year’s National Budget to pursue the US$214 million in questionable costs claimed by American oil giant ExxonMobil.

An audit conducted by a British firm, IHS-Markit found that the US$1.6 billion in expenses incurred by the oil company between 1999 and 2017, for activities in the oil-rich Stabroek Block, were inflated. The team recommended that the GoG dispute US$214M of the total sum claimed by the company.

Recently, Vice President Bharrat Jagdeo, chief policymaker for the sector said the government is prepared to head to arbitration if the company does not accept the findings of the audit report.

Arbitration is the legal avenue to resolve conflicts between the parties to the 2016 Petroleum Agreement.

On Thursday, Economic Advisor to the Opposition Leader, Elson Low said, “The first audit has ended in a dispute regarding the amount that is to be recovered. It will be very interesting to see whether the government puts aside revenue in the national budget for the appropriate consulting and legal fees to be able to deal properly with that issue or whether they are not serious about recovering that money.”

He insisted that failure to make appropriate financial provisions for the return of the US$214M would demonstrate the government’s ineptitude.

According to him, “It would be typical of the PPP to say that they are going to go after returning that money for the Guyanese people and to take virtually no step to actually return the money to the Guyanese people.”

At his year end press conference, the VP told Kaieteur News in response to a question, “right now we have a dispute over that sum; if Exxon decides to pay it or accept it then we don’t have an issue.” Consequently he made it clear that if the company refuses to do either of those they will ultimately end up in arbitration.

The VP was previously asked by this newspaper during his weekly press conference, 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.

As such, 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.” To this end, the former Head of State noted, “We may have to go to arbitration.”

At that time, 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 had said.

Arbitration and the 2016 PSA

Kaieteur News previously reported that the findings and recommendations of an audit may not be enough to ensure Guyana is not cheated by the Stabroek Block partners- ExxonMobil, Hess and CNOOC- during production activities.

This is so as the 2016 Production Sharing Agreement (PSA) states that while the Contractor will be allowed to recover costs in dispute, the matter will only be resolved through arbitration, if the two sides fail to reach an agreement within 60 days after the disagreement is flagged.

This process can go on for over one year, after the tribunal is fully constituted.

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.

Read more here: https://www.kaieteurnewsonline.com/2023/04/12/dispute-settlement-over-oil-expenses-can-take-up-to-one-year/

 

 

 

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• arbitration, Audit, budget, oil, opposition

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