Given its commitment to transparency of the petroleum sector and having announced that ExxonMobil’s expenses went down from US$214 million to US$11 million even after a final audit report was submitted, the government should explain to the nation how the decision was made, former Auditor General Anand Goolsarran says.
And since the Guyana Revenue Authority (GRA) has said that it was not objecting to the report’s $214 million sum, as it explained its role, Goolsarran said that the Auditor General’s Office should have had a role, given its constitutional separation from Guyana’s executive arm.
“The Vice President, however, has indicated that the disputed costs have been reduced to US$11 million since ExxonMobil’s subsidiaries submitted additional documentation in support of the expenditure. It is, however, unclear whether additional documentation could be provided to justify the expenditure after the audit was closed and the related report issued. This is especially so, considering the elaborate and exhaustive process that the auditors went through to gain acceptance of their report,” Goolsarran posited in his Accountability Watch column.
“Assuming this is so, and in order to allay fears that the authorities might have been going easy on ExxonMobil’s subsidiaries in relation to the disputed costs, it is most desirable for another independent audit to be commissioned to examine the additional documentation provided by ExxonMobil’s subsidiaries. After all, Guyana’s share of the disputed costs is US$107.2 million. That apart, the auditors have deemed amounts totalling US$34.346 million ineligible in the context of the PSA and are unlikely to be justified through additional documentation. A clarification from the authorities is therefore needed,” he added.
The former Auditor General said that given the constitutional responsibilities vested to this country’s Audit Office, it should have been part of the audit.
“Considering that the GRA might have acted outside of its mandate in accepting to review the work of the auditors as well as the fact that it is part of the executive branch, it would have been entirely appropriate for the Auditor General to be involved in the review of the auditors’ report. This is especially so, given his constitutional status and independence from the executive; and for his office to be provided with the necessary resources to do so. Why the Audit Office was bypassed remains unclear,” he said.
Further, he added, “both the two percent royalty and Guyana’s 50 percent share of profits after a deduction of 75 percent of the value of production, are public revenues that are auditable by the Auditor General. He is also the appointed auditor of the Natural Resource Fund (NRF) into which all oil revenues are deposited.”
Last week, the Stabroek News reported that the GRA has offered a no-objection to the US$214 million in questionable claims by ExxonMobil’s subsidiary in a move that will likely raise the question of arbitration on a matter, which is pivotal to whether this country is being denied more profits.
After the damning audit by UK firm IHS Markit was kept from the public for two years, Stabroek News reported on its findings on April 2 this year. Five months later, after a series of excuses in which it has cited the need for more verification of the IHS Markit findings, the government is still to pronounce on the US$214 million, which would constitute additional profit to this country once it was disallowed.
Stabroek News has been told that the GRA wrote to Minister of Natural Resources Vickram Bharrat last month advising that the audit be finalized and offering a no-objection to the key finding that there was a total of US$214 million in questionable expenses. The government would then be expected to formally notify Exxon-Mobil’s subsidiary Esso Exploration and Production Guyana Limited (EEPGL), now ExxonMobil Guyana Limited, and insist that its profit line be credited with half of the questioned figure.
Sources told Stabroek News that the GRA had been first asked in November last year to provide a no-objection to the IHS Markit report but had replied that it was in no position to do so as it was not a party to the discussions and agreements between EEPGL, IHS Markit and the Ministry of Natural Resources. The GRA never subsequently received any information that would enable it to conduct a review and provide an opinion and this was what led to the letter last month to Bharrat stating that given the time that had elapsed, the audit be finalized and the finding in relation to the questioned US$214 million should stand.
Since the letter was sent, there has been no word from the Ministry of Natural Resources on the matter. The ministry and the government have been accused of being soft on ExxonMobil and the formal position that US$214 million was improperly claimed could lead to the US Company going to arbitration for a ruling.
Goolsarran made reference to a GRA letter and that a week earlier, the Vice President indicated that the disputed costs had been reduced to US$11 million after ExxonMobil’s subsidiaries presented additional documentation in support of the related expenditure. Those two positions, he reasoned, appear to conflict with each other.
He noted that Annex C of the 2016 Petroleum Sharing Agreement (PSA) defines pre-contract costs to include contract costs, exploration costs, operating costs, service costs, general and administrative costs, and overhead charges as defined in the 1999 Agreement.
Goolsarran also pointed out that around the same time that the 2016 PSA was signed, the then administration entered into a bridging deed with ExxonMobil’s subsidiaries, linking the 1999 PSA with that of 2016, thereby extending the effective commencement date of the 2016 PSA backwards to 1999. “This means that all costs incurred since 1999 are considered recoverable costs. It is, however, unclear what the rationale was for the bridging deed and what the specifics are, since the deed has never been made public,” he said.
On auditing arrangements, he pointed out that the “PSA is silent on the auditing of the pre-contract costs but that the APNU+AFC government had nonetheless commissioned one, which to date has not been made public by the PPP/C.”
When the Stabroek News raised the matter in April 2023, Goolsarran noted that the Vice President had denied that the government was hiding the report.
“Following the Vice-President’s denial, GRA issued a statement the next day explaining that the auditors had issued an initial report on 20 March 2020, and what they deemed a final report on 31 July 2020. However, the report did not include Exxon’s response. Thereafter, there were two other iterations of the report between July 2020 and November 2020. After a review of the various versions of the report, GRA informed the auditors of a number of deficiencies in the report. Accordingly, it requested the auditors to further revise their report and resubmit it for transmission to Exxon’s subsidiaries by 3 February 2021. The auditors issued their final version of their report in March 2021 which was transmitted to ExxonMobil’s subsidiaries on 2 July 2021,” he related.
Goolsarran noted that it has been over two years since the auditors issued their final report, and discussions involving the ministry, Exxon and GRA were still ongoing. “However, the fact that no further revisions to the March 2021 report have been made, would suggest that the auditors are standing by their report. In any event, the auditors have discharged their responsibilities under their terms of reference for the audit,” he stressed.
