‘We are fully transparent with our accounting practices and records’
ExxonMobil says it has submitted its responses on the findings of the IHS Markit report which unearthed some US$214 million in questionable claims and this raises again the question of when the government will disclose its final position.
The final audit report by the UK firm on US$1.67b of the earliest oil spending was completed in March 2021 but has not been publicly released along with the government’s position on the questionable expenses.
“…The company is regularly audited by the government, its co-venturers and professional audit firms to verify the integrity of its accounting against international standards, and the terms of the Production Sharing Agreement and Joint Operating Agreement,” the company said in response to questions from Stabroek News and through its local Media Relations Advisor, Kwesi Isles.
“We are fully transparent with our accounting practices and records, and we have communicated to the Guyana Revenue Authority and the Ministry of Natural Resources our response to the initial claims raised by the IHS Markit audit,” it added.
The company noted that, “as a practice ExxonMobil Guyana does not comment publicly on draft reports.”
The public only became aware of the findings of the IHS Markit report when Stabroek News reported on it in its April 2nd 2023 edition.
Among a plethora of issues, the audit report found that the Government of Guyana (GoG) could contest some US$214.4 million in the expenses claimed by Exxon. This figure works out to 12.8 per cent of the US$1.67 billion figure for the period 1999 to 2017.
“The Audit has established that GoG has reasonable grounds to dispute US$214.4 million plus overhead adjustments of the costs currently included by EEPGL in the Cost Bank. This amount represents 12.8% of the cumulative cost recovery balance as of Q4 2017 Statement,” the IHS Markit Final Audit Report said.
The disputed costs fall into three main categories – Defined Costs for Removal (DCR), Inadequate Supporting Documentation (ISD), and Ministerial Approval Required (MAR). For each of the categories, the sums were: DCR – US$34 million, ISP – $179.8 million, and MAR – US$0.27 million.
“Defined Costs for Removal” amount to US$34.4 million – these costs have either been included in error, are not aligned with PSA (Production Sharing Agreement) provisions, are not related to Petroleum Operations, or are considered to fall outside of industry best practice. “Inadequate Supporting Documentation” accounted for US$179.8 million – these costs suffer from a transparency issue as the cost basis, nature, and justification of these costs could not be established with the furnished documentation even after several rounds of documentation requests from the Audit Team. Although these costs may be valid, the GoG has the right to the transparency of how these costs relate to Stabroek Petroleum Operations,” the audit report asserted.
It continues, “Minister Approval required” for US$0.27 million – these costs have been identified as predominantly R&D related costs which require Minister Approval before they can be considered cost recoverable. No evidence of Minister Approval has been provided.”
Commissioner-General of the GRA Godfrey Statia has said that it is not the intent of the government to keep the document secret but that it was still being reviewed by his agency and the Ministry of Natural Resources. He assured that after the review the document would be made public.
“The GRA and the MNR continue to actively liaise and review the “Final” Audit Report and all Subsidiary Reports for the period 1999 to 2017. Upon completion of its review, its findings shall be made public,” Statia had said in a letter published by this newspaper, as he responded to articles that were carried by this newspaper.
The report stated that Exxon’s subsidiary’s main accounting record or its General Ledger recorded expenditure at the transactional level providing accounting balances, and had costs spread across two different accounting systems. The report said that the company provided annual extracts in a Microsoft Excel format for each system between 2004 and 2017.
The company also told the auditors that prior to 2004 the same system was not in place and thus not available, as it had been “purged in accordance to their internal data retention policies.” However, the company provided a summary of costs incurred during this five-year period.
