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Gov’t and GRA still silent on findings of US$7.3 billion expenses
11 months after receiving report…
Kaieteur News – As the one-year anniversary approaches since the Government of Guyana (GoG) received the audit report from VHE Consulting on the US$7.3B expenses incurred by ExxonMobil Guyana Limited (EMGL), during the period 2018 to 2020, the country is yet to receive an update on the process.
A previous audit of the oil company’s US$1.6B expenditure, racked up between 1999 and 2017 flagged US$214M in questionable costs. That audit was done by a British firm, IHS- Markit and recommended that the GoG contest this sum being claimed by the company. Auditors discovered that Exxon had brazenly misused the country’s oil revenue to fund goods and services not provided for under the 2016 Petroleum Agreement.
That report was never shared publicly by the government, however the administration has since signalled its intention to head to arbitration over the disputed sum, as Exxon is adamant over the legitimacy of the costs.
In the meantime, however politicians and the Guyana Revenue Authority (GRA) alike remain tight lipped on the findings and way forward regarding the second audit. This report too was never made public by the GoG.
On April 14, 2023, Kaieteur News reported that Vice President Bharrat Jagdeo said the second audit report was handed over to government. The chief policymaker for the sector had also noted the document was being reviewed by the technical teams at the time.
“The report has been concluded and it’s now with the technical people and I’m not going to…they have to review it, the GRA (Guyana Revenue Authority), the technical group and they have to then make a (pronouncement). I am not interfering,” the VP said at his weekly press conference.
Jagdeo said there is a notion that the government wants to hide the reports to protect the oil companies but this is against the intention of the administration. He clarified, “We have a big team going through these audits because we want to see any area, we have auditors but we want to see any areas where we believe we should strengthen and they are helping us now a lot in resolving the issues now with the new PSA (Production Sharing Agreement) and also with the new (Petroleum) law.”
The silence of the authorities on the audit of the company’s expense is troubling given the rate at which the government has been accelerating growth in the petroleum sector. Guyana now has three Floating Production Storage and Operating vessels (FPSOs) producing oil in the Stabroek Block. The daily rate of production has been pushed to 600,000 barrels per day (bpd). With greater production, Exxon’s cost pool also enlarges, as the Contract allows for up to 75% of all earnings to be deducted towards cost recovery. The remaining is shared with Guyana equally as profits.
The country is in the process of recruiting another firm to conduct a third audit for the period 2021 to 2023, while the two prior audits are yet to be closed.
PSA and audits
The Stabroek Block PSA allows for audits to be conducted within two years, from the end of each calendar year. At the conclusion of the process, the Contractor must be furnished with the report and its findings within 60 days to provide a response. The response from Exxon will detail its objection or acceptance of the audit claim, along with explanations thereof. The contract also allows the subject Minister to conduct further investigations within 60 days of receiving the Contractor’s response.
It must be noted that the PSA makes it clear at Section 1.5 (b) that: “…If within sixty (60) days of the Minister’s further investigation, the Parties are unable to agree to the disposition of the Minister’s audit claim, the claim shall be submitted to the sole expert in accordance with Article 26 of the Agreement.”
Article 26 of the contract sets out the conditions as it relates to arbitration. The contract in the meantime allows for the Contractor to recover these costs until the dispute is settled. The US$7.3 billion audit was awarded by the current administration back in May 2022. It was conducted by VHE Consulting which is a registered partnership between Ramdihal & Haynes Inc, Eclisar Financial, and Vitality Accounting & Consultancy Inc. The Local Consortium was supported by international firms – SGS and Martindale Consultants.
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