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Exxon found incorrectly double-billing Guyana for private shore base works

Jun 01, 2024 News

Kaieteur News – An audit of spending done by ExxonMobil Guyana Limited (EMGL) continues to reveal instances that the company incorrectly billed the Guyanese government for costs that are not eligible for reimbursement.

The audit, spearheaded by VHE Consulting, found that EMGL included charges on the Cost Recovery Statement for works that should not have been billed, resulting in a potential double-billing situation.

The audit identified specific costs for pipe racks and general shore base operations at the John Fernandes Limited (JFL) shore base, performed by Guyana Energy Support Services. These services included labour for loading and offloading boats and transporting equipment to various locations. The invoices for these services were recorded in February, April, and May of 2018, as well as January and February of 2019.

The auditors observed however that the costs were incurred prior to October 7, 2016, which is a critical date because, according to the June 27, 2016 Petroleum Agreement (PA), costs incurred before the “Effective Date” are not recoverable.

Section 3.3 of Annex C to the PA, the auditors cited, explicitly states that costs incurred before the Effective Date, defined as October 7, 2016, are not to be included in the recoverable costs. Despite this stipulation, the audit revealed that EMGL had included these pre-Effective Date expenses in their Cost Recovery Statement.

In response to the audit findings, EMGL denied any wrongdoing, asserting that the invoiced amounts and activities identified by the auditors were included as part of the pre-contract costs outlined in Section 3.1(k) of Annex C.

The auditors disclosed that according to EMGL the delay in invoicing was due to the time-consuming process required to obtain VAT exemptions from the Guyana Revenue Authority (GRA) as stipulated under Article 15.1 of the PA.

This delay, according to EMGL, did not impact the overall pre-contract cost amount since the costs were accrued during the exploration and appraisal wells’ ongoing activities.

However, the audit findings suggest otherwise, and indicated that including these costs in the Cost Recovery Statement constitutes double-counting, as they were already part of the settled pre-contract costs.

The PA’s language states that all such pre-contract costs should have been agreed upon and settled by specific deadlines, which EMGL contends were met, the auditors observed in reinforcing their observation.

VHE Consulting has since sought to emphasize the importance of strict adherence to the financial terms of the PA to protect Guyana’s economic interests.

“The inclusion of these pre-Effective Date costs is a clear violation of the Petroleum Agreement terms,” the auditors found while urging that “It is crucial that all parties adhere strictly to the agreed financial frameworks to ensure transparency and accountability.”

As investigations continue, both the Guyanese government and EMGL are working to address the billing discrepancies, according to stakeholders.

 

 

 

 

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