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ExxonMobil used oil profits to pay for warehouse operations in Canada, US & Gulf of Mexico

Jun 02, 2024 News

Kaieteur News – ExxonMobil Guyana Limited (EMGL) billed Guyana for works undertaken in the United States of America and the Gulf of Mexico, claims for which auditors have since taken umbrage since they did not fall under the rubric of the provisions for cost oil recovery in the 2016 Production Sharing Agreement (PSA) to develop the Stabroek Block.

VHE Consulting had been hired to audit the expenditure—already recouped by EMGL—and found that the country had been made to pay for warehouses charges not even located in Guyana.

According to the Auditors in their now public report that documents a series of breaches and abuses, it was observed that EMGL included in the Cost Recovery Statement an allocated share of overhead for its worldwide drilling warehouse(s).

The Stabroek Annual Overhead Charge was said to cover all overhead functions performed outside of Guyana, including “this worldwide drilling warehouse overhead” but according to the auditors, “directly charging the warehouse overhead is a duplication of amounts covered in the Annual Overhead Charge.”

According to VHE Consulting EMGL, “accumulated overhead costs of its global warehousing operations and allocated the overhead to various countries based on the value of material transfers in those countries.”

Poignantly, the auditors observed “it is not known whether the worldwide drilling warehouse overhead is for actual costs or some type of percentage assessment to cover overhead functions.”

It was found nonetheless that “regardless, the concept is the same; the overhead is for general and administrative functions associated with ExxonMobil’s global warehousing operations.”

Additionally, VHE Consulting reported that EMGL did not confirm that 100 percent of Stabroek materials were sourced from its Houston warehouse, “how many warehouses exist, and what comprised the cost base of the Stabroek allocation (leasing costs, payroll costs for only warehouse personal, payroll costs for the Contractor’s parent’s entire Procurement and Logistics group, real estate costs, etc.), and the propriety of using material transfer values as a basis of cost allocations.”

As such, the auditors determined that until such detailed information is provided, this indeterminable “worldwide warehousing” cost is disallowed and deemed covered by the Annual Overhead Charge.

 

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