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ExxonMobil wants Guyana to pay for HQ workshop held in Houston, Texas – audit reveals
Audit Finds…
Kaieteur News – A recent review of the Cost Recovery Statement submitted by ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), now called ExxonMobil Guyana Limited (EMGL) has revealed the inclusion of costs related to a KPMG-led integrated operations strategy workshop.
KPMG is an international financial services firm that deals with taxes, audits and other legal matters. In an audit conducted by VHE Consulting and relates to the expenditure incurred between 2018 and 2020, it found that the workshop, however was held at ExxonMobil’s Houston, Texas, corporate headquarters, and while it was intended to analyze ExxonMobil’s Guyana operations the auditor’s findings said the workshop was not directly related to the Stabroek Petroleum Operations, and as such the company was not entitled to recover the charges claimed.
According to VHE Consulting, the strategy workshop was conducted solely for ExxonMobil’s corporate purposes, and was delivered to EEPGL’s parent company rather than the co-venture partners in the Stabroek Block, namely EEPGL, Hess Corporation Guyana, and China National Offshore Oil Company (CNOOC).
Despite this, the costs were included in the Contractor’s Cost Recovery Statement. According to the terms of the Petroleum Agreement, such costs should have instead been covered by the Annual Overhead Charge. VHE Consulting noted that ExxonMobil Upstream Oil & Gas Company hired KPMG for the workshop, which was then subsequently billed to the contractor.
The report found too that the workshop’s objective was to develop an integrated operations support strategy for ExxonMobil’s Guyana assets, focusing on maximising value and minimising erosion across all operating assets in the region.
These include, Evaluating potential value drivers for individual Guyana assets and integrated drivers across all assets; Gathering lessons from ExxonMobil’s experience in integrated operations support and reservoir management; Defining key elements of the integrated operations support for Guyana, performing tradeoff analyses, and identifying value-driving capabilities; and Promoting stakeholder alignment on integrated operating strategies, among other objectives.
Conducted in May 2019 and continuing through January 2020, the workshop, the Auditors reminded was specific to ExxonMobil’s strategic management of its Guyana assets, not the Stabroek Petroleum Operations. To this end, it was pointed out that under Section 2 of Annex C of the Production Sharing Agreement, recoverable costs must be directly related to Petroleum Operations, defined as activities for prospecting or production of petroleum. As such, the auditors found that given that the strategy workshop was a corporate initiative and not directly linked to Production Operations, it should be classified under general and administrative costs covered by the Annual Overhead Charge. To this end, the auditors exhorted that the charge for which Exxon Mobil Guyana was claiming Guyana pay from its oil under the PSA arrangement also includes services rendered outside of Guyana for managing the Exxon’s activities under the Agreement. To this end, the auditors have since determined that as the KPMG workshop was specific to EEPGL’s parent company and not directly for Production Operations, it falls under the category of overhead services and as such Exxon has since been requested to credit the Cost Recovery Statement for the workshop costs, as they are covered by the Annual Overhead Charge, and not chargeable under the Petroleum Operations accounting procedures.
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