Years later Govt. nowhere close to recovering tens of US$ millions illegally deducted by Exxon from Guyana’s profits

May 30, 2024 News

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Kaieteur News – Years later, the Government of Guyana is yet to recover tens of millions of US dollars that were illegally deducted by Exxon Mobil from Guyana’s profits.

Vice President Bharrat Jagdeo was asked at his Thursday last press conference at Freedom House, by this publication to give an update on the audits and actions taken to address the discrepancies they highlighted. He said that, “We need to close the first audit…you need to formally say, so I have to find out if that was done and it should have been done because that was like about three weeks ago, that they had to write and say we had a difference of opinion over US$214M. So that letter, closing it with Exxon, so there is no room for negotiation anymore.”

However in relation to the second audit government is still in talks with the oil company to address the instances the auditors flagged. The VP said that, “They still are in a back (and forth); they still have been writing Exxon and awaiting response on a lot of the issues that you have serialized in the Kaieteur News.”

The first audit into ExxonMobil’s expenses incurred during the period 1999-2017 which amounted to US $1.6B was conducted by the international firm IHS Markit and revised in the year 2021.  In this audit the auditors highlighted in the introduction that there was some “$214.4 million plus overhead adjustments of the costs currently included by EEPGL in the Cost Bank” that the Government of Guyana “has reasonable grounds to dispute.”

The second audit into Exxon’s expenses incurred for the period 2018-2020 which amounted to some US $7.3B was done by local consortium Ramdihal & Haynes Inc., Eclisar Financial, and Vitality Accounting and Consultancy Inc (VHE Consulting).  In this audit it was identified that there was some US $65.1M which were listed as exceptions. This included “Improper Charges for Ogle Office Complex Studies and Construction Costs” which totaled US$18.9M, ‘Enterprise Development Center’ at US $3.5M and a number of others.

It is important to note that costs recovered by Exxon have to be directly related to oil production in the Stabroek Block offshore Guyana. In October 2023 this publication reported that ExxonMobil had used Guyana’s oil profits on Christmas cookouts, zumba and yoga classes.

It was revealed that the oil company used US $136,003.62 to cover costs attached to sponsorships, fitness classes, promotional items and other similar activities, which auditors said were in no uncertain recoverable. The Stabroek Block Production Sharing Agreement was also referenced by them and it said that only those costs associated with expenses and expenditures relating to the petroleum operations can be recovered from the Stabroek Block account.

For further clarity the auditors noted that in order for a cost to be recoverable it had to be in connection with production operations. Hence, the removal of US $136,003.62 from the Stabroek Block account to cover Yoga and Zumba fitness classes for its expatriates, a Christmas potluck luncheon, the hosting visit for a Shell Beach Outreach Programme including catering and boat and ground transportation; Exxon branded duffel bags, coolers, and lanyards for a Contractor Safety Workshop; Meals, beverages, tents, chairs, and facilities for “Culture of Health” 5K run/walk and other similar events leave it in breach of the contract.

Another instance highlighted in the second audit was the misuse of funds to pay for drill ships to be on standby for Kaieteur and Canje blocks. Going a little more into detail the auditing team noted that Exxon had four drill ships from Noble Corporation in early 2020 working. After suspending the services of Stena Carron and Noble Tom Madden and move them closer to shore into a “hot standby” (idle but still operational) mode due to staffing issues, records show that Exxon had Stena on standby to execute works for Stabroek as well as Canje and Kaieteur which it walked away from in 2023.

Records also show that Exxon had the Stena Carron drill ship drill the Tanager-1 well in the Kaieteur Block beginning September 9, 2020 and ending November 23, 2020. Stena was then moved to the adjacent Canje Block where it worked on the Bulletwood-1 well beginning December 31, 2020 and ending March 2, 2021. Stena was also used to drill the second well in Canje called Jabillo-1 beginning March 12, 2021 and ending March 20, 2021.

Furthermore, Exxon was caught by auditors spending Guyana’s oil profits to pay for the monitoring of newspapers and media between the period 2018 and 2020. A review of the company’s expenses during the period found that a total of US$2,465,061.62 was claimed by Exxon for its Public Affairs Program. These costs, according to the auditors are not related to petroleum operations and should therefore not be billed to the country’s oil. According to the audit report, Exxon used the sum stated above on media messaging; stakeholder relations, issues management; recording, editing, and voice talent for public service messages on Guyana’s Sovereign Wealth Fund; hosting visit for Shell Beach Outreach Program including catering and boat and ground transportation; Liza Destiny Arrival Commemoratory Event; branded drawstring sports packs and bottles; media monitoring services and newspapers as well as brochures for Exxon.

The misuse of Guyana’s oil profits flagged in the second audit report by VHE Consulting, should have already been finalised between the Government of Guyana and the operator of the Stabroek Block, ExxonMobilover 230 days ago. This is according to the provisions of the 2016 Petroleum Agreement that governs the unusually large oil block, measuring 26,800 square kilometers. 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. This means that the PSA has allocated 180 days to complete the review of the audit report.

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• Audit, auditors, Exxon, instances, review

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