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ExxonM spent Guyana’s oil profits to seek legal advice on how border controversy will affect their pockets – 2nd Audit reveals
Exxon’s first Floating Production Storage and Offloading (FPSO) vessel in Guyana, the Liza Destiny
Kaieteur News – During the period 2018-2020, ExxonMobil Guyana Limited (EMGL) spent Guyana’s oil profits to seek legal advice on how the Guyana/ Venezuela border controversy could affect their profits.
This was flagged in the audit report prepared by VHE Consulting, a partnership between Ramdihal & Haynes Inc; Eclisar Financial; and Vitality Accounting & Consultancy Inc. The local consortium was supported by International firms- SGS and Martindale Consultants for the cost recovery audit of Exxon’s uS$7.3B expenses, racked up between the period 2018 to 2020.
According to the report, Exxon spent a total of US$500,000 or GY$100M on legal costs not recoverable. Included in the amount were costs for legal advice on the ongoing border controversy. The document states that the company utilised the services of Skadden, Arps, Slate, Meagher & Flom LLP, a top US law firm to provide legal advice on the potential impact the border dispute may have on the contractor’s interest in the Stabroek Block. Further, Exxon also sought advice on what could be done to “defend that interest”.
Auditors however highlighted that ExxonMobil has no official leading standing as the dispute is solely between the two countries. They therefore pointed out that any legal fees incurred by the Contractor must be shared only among the Stabroek Block partners- Exxon, Hess and CNOOC.
“Even though the Stabroek Block is within the disputed area, it is only a portion of the entire disputed area. This dispute dates to the Good Office process over three decades ago; it is reasonably presumed that the Contractor was aware of this dispute before their acquisition of Stabroek Block interests,” the auditors said in the report.
Therefore, the team made it clear that the legal services retained by the Contractor from Skadden Arps Slate Meagher & Flom for advice pertaining to the border dispute is not recoverable since it does not meet the requirements outlined in Section 3.1(h) of the 2016 Production Sharing Agreement (PSA).
ExxonMobil is the operator of Guyana’s oil rich Stabroek Block, where over 11 billion barrels of oil has been discovered since 2015. In 2016, the oil giant signed the infamous 2016 PSA which allows it to exploit the resources in the 26,800 square kilometers block. Presently over 600,000 barrels of oil per day (bpd) is being produced by ExxonMobil, with the company aiming to increase daily capacity to 1.3 billion bpd by 2027.
Guyana and Venezuela are presently before the International Court of Justice (ICJ) pending the outcome of the border controversy, where that country is claiming two thirds of Guyana’s mineral rich lands, Essequibo. Venezuela has historically claimed Guyana’s Essequibo region as its own despite its initial acceptance of the 1899 Arbitral Award that gives Guyana control of the Essequibo. Essequibo is Guyana’s biggest county, filled with gold, diamonds and significant natural resources. The case finds its genesis in Venezuela’s challenge to the validity of the 1899 Arbitral Award of the boundaries that separate the two countries. As a result, the two countries were sent to the world court through the United Nation’s (UN) peacekeeping process to settle the controversy once and for all.
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- Audit, Border, controversy, ExxonMobil, legal, oil
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