Nearly 22 months after it took office, the PPP/C Government yesterday finally signed a deal to audit a whopping US$9b in expenses claimed by ExxonMobil and its partners which could help to establish whether this country is receiving all of the oil profits it should.
Under the maligned 2016 Production Sharing Agreement, up to 75% of each’s year’s oil revenues can be assigned to production costs while the remainder comprises profit oil to be split evenly between Guyana on one hand and ExxonMobil, Hess and CNOOC on the other. If any of the production costs are disallowed by the auditors it could potentially expand profits to this country.
Underscoring that public expectations should be tempered as the aim is not to find ExxonMobil guilty of impropriety, but to verify and validate the US$9 billion in claimed costs, the RHVE consortium of local accounting firms yesterday signed the US$700,000 ($150.5 million) contract to audit Guyana’s 2018 to 2020 cost oil and is expected to commence work soon.
For the contract which has a duration of four months , Ramdihal and Haynes, Vitality Consulting, and Eclisar Financial & Professional Services (EFP) that make up the RHVE consortium, have subcontracted the US firms of Martindale Consultants Inc, and Squire Paton Boggs, for technical support and expert assistance.
“The purpose of this audit is to verify the validity and the allowability of claimed costs. We look at what Exxon submitted and ask the questions, ‘is it valid and is it allowable under the production sharing agreement?’ There is an expectation that we will find that Exxon has been cheating and we would like to temper the expectations of the Guyanese public,” Chartered Accountant and Professor Floyd Haynes who leads the consortium yesterday told Stabroek News following the signing.
“The idea that Exxon has been overbilling and overcharging, it is grossly misleading and it is not fair to mislead the public. We don’t know what we will find, but we will ensure the costs are legitimate and allowable,” he added while underscoring that the firms will do their work with professionalism and in the best interest of the country.
Both sides pointed to the decrease in the original cost tendered for, with Minister of Natural Resources Vickram Bharrat stating “Quite frankly we have negotiated with these guys and bring down the cost to almost half. It is not something that they are happy with but it is about building partnerships.”
While the National Procurement and Tender Administration Board has logged a $304.7 million figure quoted by the company in its bid, Haynes disputed this sum saying that “it is not accurate,” although he agreed there had been some negotiating resulting in a lower figure.
Asked by this newspaper what sum had been proposed, he said that he did not have the documents at hand but the sum was not much more than what is in the current contract and he would be taking up the disparity with the NPTAB.
Haynes also explained the reason for its subcontracting of experts, as he thanked the Irfaan Ali government for giving local companies an opportunity to participate, even as they build capacity and gain skills transfer.
“Martindale is a subcontractor. We are the prime contractor as you would see that the contract was awarded to us the consortium. We have aligned or recruited Martindale as one of our subs to do the audit work and then we brought in a company called SGS and a law firm Squire Boggs who would supplement our expertise and at the same time provide some training and skills transfer,” he explained.
President Irfaan Ali and Vice President Bharrat Jagdeo were singled out for their role in giving locals the opportunity to benefit from the sector while they simultaneously gain the expertise and skill sets needed so that they can in the future, execute the jobs fully.
“It was the vision of the president and vice president that a local company who has Guyana’s best interest at heart be able to participate. It is a knowledge and skills transfer process also so the local firm aligns with the experts so that sometime in the future local firms can perform the audits on their own,” Haynes pointed out.
At the signing yesterday, Minister Bharrat also pointed to locals being afforded the opportunity to learn about a sector that is new here. “Our local auditors might be very familiar with auditing basic expenses – fuel, meals, transportation – but when we are talking about jumpers and risers and FPSOs and these technical terms, obviously they will need that kind of technical knowledge and expertise on board to assist them to have a thorough exercise being done.”
Bharrat also noted that the audit will put to rest any doubts about the government’s willingness to conduct the audits.
Lot of misrepresentation
“ There has been a lot of misrepresentation; a lot of half-truths sometimes; there has been all sorts of sensationalized news carried in the media that the government was not interested in these audits and had missed the timeline to audit Exxon Mobil and the government is in partnership with ExxonMobil and all sorts of negative regards to the sector. Today we have to be honest and fair and we need to credit where credit is due.”
According to Bharrat, it was his government that set a framework for building the oil and gas sector, “and it is not even two years as yet and we are speaking of local content legislation and we will sign with the company to audit the expenses of ExxonMobil. And more importantly, is that we are signing the contract with a local consortium.”
But in November last year, Vice President Bharrat Jagdeo had announced that ExxonMobil’s post-2017 expenditure for the Liza-1 and Liza-2 wells would not be audited as government was not able to select a strong local group to undertake it. This statement was at odds with the fact that the government had advertised last year for foreign firms.
The comments resulted in a string of criticisms from the public with many emphasising the need for the sums to be professionally scrutinised. It was compounded by the fact that it was over one year since the audit of the US$460 million in pre-contract costs. That IHS Markit report is yet to be released by the government.
Noted too was that the statutory two-year period for the 2017-2019 auditing had expired and there was a concern that the company might object to its books being audited after the contracted time had elapsed.
But government had stressed that the auditing of the over US$9 billion sum could still be undertaken and as such there was no need to request an extension from ExxonMobil. Former APNU+AFC minister, David Patterson, had questioned if the Ministry of Natural Resources or any other agency with oversight of the oil & gas sector had approached ExxonMobil for an extension of the deadline for auditing the expenses.
Asked for an update by this newspaper yesterday, Bharrat said that the IHS report is coming to completion and that this contract had to be signed before the IHS one could be closed as there needed to be some reconciling of expenses. “It is being completed. This one had to be signed first because there are some things, expenses that had to be looked at…”
ExxonMobil has told this newspaper that it is confident of its bookkeeping matters and transparency of the company. It added that it has never shied away from audit requests and that it submits periodic reports on its spending to a number of government agencies here.
“ExxonMobil Guyana considers audits a normal part of our operations and cooperates with the government so it can fulfill its obligations. We are fully transparent with the Government on our budgets and cost banks for each block and have implemented extensive cost controls across our business in line with our contracts and the laws of the country,” ExxonMobil spokesperson Janelle Persaud had said in response to questions from Stabroek News.
