Exxon attempts to claim millions extra with overstated invoices for FPSO payments

May 22, 2024 News

Auditors Find…

Kaieteur News – An audit has revealed significant overstatements in the Cost Recovery Statement submitted by the ExxonMobil Guyana Limited (EMGL) led consortium, working in Guyana’s Exclusive Economic Zone (EEZ) seeing the company looking to reclaim millions not due to it as a result of overstated invoices.

The audit was undertaken by VHE Consulting and relates to the expenditure incurred between 2018 and 2020. According to the auditor’s findings the contractor included costs for Guyana Withholding Tax (WHT) on recurring invoices related to the Destiny Floating Production Storage and Offloading (FPSO) vessel’s financing, despite contractual terms stipulating that these amounts were inclusive of WHT and, therefore, not recoverable.

It was pointed out that the original contract specified that the daily financing costs of $46,163.00 were inclusive of WHT. Additionally, the daily capital cost component of $327,053.00, billed alongside the financing costs, also included the “inclusive” language. However, while WHT was not assessed on the capital cost component, it was erroneously added to the financing costs on the invoices.

The report noted that an amendment to the contract executed on December 15, 2017, retained the “inclusive of” WHT language for the financing component but the contractor continued to charge WHT separately, arguing that the “Total interest due for the Period” needed to be grossed up for WHT to arrive at the correct total.

According to the Auditors, EMGL in response, claimed this was due to an administrative oversight in the contractual language. Despite the assertions, the auditor emphasized that both the original contract and the subsequent amendment clearly indicated that financing costs were inclusive of WHT and that contractor’s explanation did not provide a contractual justification for the separate WHT charges.

Furthermore, the argument that including WHT in the financing rate was necessary to ensure financial institutions received actual debt financing costs was dismissed by the auditor. This rationale was deemed insufficient to alter the non-recoverable nature of WHT under the Petroleum Agreement inked in 2016. As such, the auditors concluded that the contractor’s inclusion of WHT in the Cost Recovery Statement resulted in an overstatement of costs and consequently, EMGL has since been requested to credit the Cost Recovery Statement to rectify these non-recoverable costs.

Exclusive Economic Zone (EEZ), FPSO, invoices, millions, Withholding Tax (WHT)

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Exxon attempts to claim millions extra with overstated invoices for FPSO payments

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