Latest update November 17th, 2024 1:00 AM
Latest News
- Guyana received US$5.4B in royalty, profits from 500M barrels pumped to date
- Final audit report of Exxon’s US$7.3B expenses sent to company, to be made public next week – Minister Bharrat
- Israeli air raid on Gaza City school turned shelter kills 10 people
- Baby dies, toddler severely burnt in Sophia fire
- Venezuelan- orchestrated cyber operations targeting Guyana – National Defence Institute
Don’t judge quality of audit by disputed costs flagged- Minister Bharrat
…says first audit period was 18 years while second was 2 years
Minister of Natural Resources, Vickram Bharrat (disputed costs flagged)
Kaieteur News- The first audit of oil major ExxonMobil’s expenses, incurred during the period 1999 to 2017, found over US$214M in questionable costs. The British consultancy firm, IHS Markit was tasked with reviewing some US$1.6B expenditure by the oil companies.
A second audit however, done by a local consortium VHE Consulting has found just over US$75M in disputed costs of the US$7.3B expenditure racked up by Exxon and partners during the period 2018 to 2020. This is according to the findings of the initial audit report, since the final report of the second audit has not yet been made public.
The massive difference in the sums flagged by the auditors, compared with the costs audited, had raised concerns regarding the process, but Minister of Natural Resources, Vickram Bharrat recently urged that stakeholders have no need to be nervous.
In an interview with Kaieteur News, the Minister explained, “I don’t think we should judge an audit on the amount that was flagged. The first audit was an extended period; it was 1999 to 2017 so it was a prolonged period.”
This publication, however, reminded that the second audit, though a shorter period, was tasked with reviewing a far greater sum of money spent by Exxon.
Bharrat nonetheless continued, “The next one was 2018 to 2020, a shorter period of time. During that period of time there was only one development- the Liza development. Much of it would have been after that, Payara, Yellowtail, Uaru, Whiptail and then like I said, you cannot judge an audit based on the amount that is flagged.”
He was keen to note that the operator may have employed systems to “do things better now.” “Maybe they are doing things better now. Maybe the system has improved because of the recommendations of previous audit or practices or whatever the case is,” Minister Bharrat noted.
To this end, he urged, “I don’t think an audit should be based on how much you find that should not be in the cost bank.”
VHE Consulting, a partnership between Ramdihal & Haynes Inc; Eclisar Financial; and Vitality Accounting & Consultancy Inc. was recruited by the government of Guyana back in May 2022 to conduct a cost recovery audit of the company.
The local consortium has been contracted by the government again to conduct the third oil audit.
Just last week Kaieteur News reported that the former Auditor General (AG), Anand Goolsarran voiced concerns about the selection of local consortium, VHE Consulting for the third audit of Exxon’s recoverable expenses.
In a recent column published by Stabroek News, Goolsarran stressed that given the financial implications for Guyana, the audit requires experienced professionals with proven expertise in cost verification.
He said there is a need for a comprehensive audit to be undertaken. Firstly, he reminded that the absence of ring-fencing provisions is a key weakness in the 2016 PSA, according to the International Monetary Fund (IMF). It was explained that a ring-fencing arrangement ensures that only costs attributable to a particular field are considered in the computation of profit oil for that field.
“Although the Agreement provides for the sharing of profit oil on a field-by-field basis, it also allows ExxonMobil’s subsidiaries to allocate cost oil to any field within the contract area, thereby defeating the main purpose of ring-fencing…” the former AG underscored.
According to Goolsarran, a thorough audit is crucial to ensure that only legitimate, reasonable expenses are recovered, which impacts Guyana’s profit share.
Further, Goolsarran noted that concerns including, the lack of basic structure, table of contents, no executive summary, the scope and methodology used, conclusion, recommendations, among other things have been raised in relation to the quality of the original audit report issued by VHE.
(Don’t judge quality of audit by disputed costs flagged- Minister Bharrat)
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