Exxon’s Italian contractor was fined in Algeria for corruption, bribery

May 06, 2024 News

– The 6th oil project

Kaieteur News – Italian-based company Saipem was fined in Algeria for corruption and bribery. In 2022 upstreamonline.com reported that Saipem had won a contract 14 years earlier to “build a 4.7 million tonnes per annum liquefaction train for the GNL3 Arzew project, and construction was completed in 2012.”

“However, the Algerian criminal proceedings saw Saipem, Saipem Contracting Algerie and Snamprogetti Algeria Branch charged, in accordance with national law, of allegedly “having obtained a contract, with a price higher than the correct value, concluded with a state-owned commercial and industrial company, benefitting of the influence of representatives of that company”; and of “false custom declarations”.

This resulted in two of the company’s former employees being sentenced by the Tribunal of Algiers. They were the then “head of the GNL3 Arzew project and a former Algerian employee — to five years and six years of imprisonment, respectively. Another employee of Saipem Group was acquitted of all charges.”

Total fines and damages of approximately €199 million ($205.5 million) were imposed on the three companies –involved, “comprising some €60 million in fines and around €139 million in favour of civil parties.”

On April 16th, 2024 this publication reported that Saipem, announced that it had won an engineering, procurement, construction and installation (EPCI) contract worth up to US$1.5 billion to supply a subsea production facility for ExxonMobil’s Whiptail ultra-deepwater field development offshore Guyana.

Saipem in making the announcement said it has already started initial activities — the detailed engineering and procurement of long lead items for Whiptail and following FID, now has the issued authorisation to proceed with the execution of the remaining project activities.

It is important to note that the French-US firm Technip FMC who also recently secured a contract for subsea works in Guyana’s 6th oil project Whiptail, worth approximately $US1B, had faced multiple lawsuits and fines for corruption and bribery of government officials, in the United Stated and the United Kingdom over the last few years.

Govt. hands tied

Amid these revelations and despite Guyana’s oil is paying for these contracts the Government of Guyana (GoG) said its hands are tied and cannot take any action to prevent United States oil major, ExxonMobil Guyana Limited (EMGL) from awarding contracts to companies that were accused of corruption. This was explained by Vice President, Bharrat Jagdeo on Thursday last. He was asked by this publication whether he is concerned that the company could be granting projects to shady companies using Guyana’s oil revenues while the country has no say.

Although Guyana’s oil is being used to procure the services of these companies, the country has no say in their awards; it can only verify whether it was overcharged after the contract has been granted.

Jagdeo pointed out that the provisions of the 2016 Production Sharing Agreement (PSA) allows the country to verify costs after they have been incurred by the operator of the Stabroek Block, through the audit process.

“That’s the purpose of the audit so when they query it, they send it to Exxon now, Exxon has to explain how this screw was procured at this cost when the benchmark price, they cost everywhere else is $3,” the Vice President noted.

According to him, the Guyana Revenue Authority (GRA) is utilising bench-marking software that compares the costs submitted by Exxon to average costs in the industry. If the costs claimed by Exxon are found to be exorbitant, it would be flagged and the company would have to explain procuring products and services beyond the industry standards. The next step would be for the oil company to return the inflated costs to the profit bank.

However, if Exxon disagrees with the government, it is then resolved through the dispute mechanism provided in the PSA, through a sole expert or via arbitration.

It would be poignant to note that Guyana would have to pay for all legal charges related to resolving the dispute with the oil company.

What Guyana needs to know about ExxonMobil- China’s Modus Operandi.

bribery, charged, company, fined, Whiptail

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