Latest update February 3rd, 2025 6:06 AM
Exxon unable to account for items purchased from sister company – Auditors reveal
Guyana in 2016 signed a Production Sharing Agreement (PSA) with Esso Exploration and Production Guyana Limited (EEPGL), since renamed ExxonMobil Guyana Limited (EMGL), along with their Stabroek Block Partners to produce crude.
President of ExxonMobil Guyana Limited, Alistair Routledge
Among the provisions of that PSA, up to 75 percent of the gross revenues earned from the oil block can be used to recoup expenses made by the Contractor/Operator—EMGL.
An audit of the expenses claimed by EMGL, for which it has already deducted unearthed a plethora of invoices that do not meet the criteria for recouping those money under the PSA.
In one such case, EMGL made a claim for in excess of US$1M, which it said was used to purchase materials from an affiliate company.
The auditors—VHE Consulting—found however, that “the validity and propriety of these material costs cannot be ascertained without the supporting invoices and further documentation and explanation.” EMGL had included in its Cost Recovery Statement a claim for US$ 1,000,645.23 on a journal voucher, for moving costs for materials to a Stabroek account from an ExxonMobil Affiliate. According to VHE Consulting however, when EMGL was requested to, it did not, provide a list of materials charged, what they were used for, where they were used, and the current disposition.
The auditors said EMGL, provided a journal entry showing amounts charged and correspondence discussing the amounts, but the journal entry did not include a list of materials transferred, support for prices or values charged, or any other documentation indicating how or even if the material was used for Stabroek Petroleum Operations.
With this in mind, the Auditors highlighted that under Section 3.1(e)(iii) (b) of Annex C (Accounting Procedure) of the June 27, 2016, Petroleum Agreement, it allows the Contractor to charge for material costs purchased from Affiliated Companies and stipulates the transfer value for New Material, shall be valued and invoice at a price, which should not exceed the price prevailing in normal “arm’s length” transactions on the open market at the time of procurement.
“Section 3.1(e)(iii) (b) Annex C also stipulates values for used materials. Contractor must adequately support the costs charged and provide documentation showing the valuation and how they were used for Petroleum Operations.”
With this in mind, VHE said that “exception is taken to the costs until the Contractor provides documentation showing the material charged, the valuation, and how it was used in Petroleum Operations. Stabroek Block Review Period: 2018 – 2020.”
As such, EMGL has since been requested to credit the Cost Recovery Statement “for these unsupported material costs.”
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