No decision made yet to head to arbitration over US$214M audit dispute with Exxon – Min. Bharrat

Feb 05, 2024 News

Kaieteur News – Three months after Vice President (VP) Bharrat Jagdeo suggested that the Government of Guyana (GoG) is preparing to head to arbitration in the US$214 million audit dispute with ExxonMobil Guyana Limited (EMGL), following questionable costs flagged by British auditor, IHS-Markit, Minister of Natural Resources, Vickram Bharrat last week disclosed that the government is yet to decide on whether to pursue arbitration.

Minister of Natural Resources, Vickram Bharrat

During the Committee of Supply session last Wednesday, Opposition Member of Parliament (MP) David Patterson questioned Minister Bharrat about budgetary allocations for arbitration in this year’s budget.

Minister Bharrat responded, “A decision has not been made as yet with regards to whether it will go through, go to arbitration or not,” he added, “regardless, the allocation will not come through the Ministry of Natural Resources.”

Guyana’s first oil audit was conducted by IHS-Markit. The contract was awarded by the Coalition government in September 2019 for the company to review some US$1.6 billion in costs incurred by Exxon during the period 1999 to 2017. The British auditor flagged US$214 million in Exxon expenses.  The first report was leaked rather than officially shared through government channels.

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$214 million to US$11 million and then to US$3 million.

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 Guyana Revenue Authority (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.

Make Audit Report Public

Moreover, MP Patterson also asked Minister Bharrat why the second audit report has not been released publicly.

The minister stated, “We made it clear in a statement that the Guyana Revenue Authority is the sole authority or the agency responsible for the audits. That is, we made it clear in a statement before that and said that corrective actions are going to be taken with regards to what happened. And one of those corrective actions is to have the right body, which is the Guyana Revenue Authority, to deal with all audits. We are just the facilitator.”

Moreover, the minister underscored that according to the 2016 PSA, GRA is responsible for the monitoring the audits of expenses.

The second audit contract was awarded by the current administration in May 2022 for a local consortium, VHE supported by an overseas company, to undertake a US$7.3 billion review of the oil company’s expenses racked up between 2018 and 2020. There has been public outcry since both audit reports, though handed over to government have not been shared publicly. The second report remains hidden from the public to date.

• arbitration, audit fiasco, Exxon, IHS Markit, Vickram Bharrat