Thirty months after a key audit of ExxonMobil’s expenditure found that it improperly listed US$214m in expenses, the government on Thursday finally accepted the findings of the UK auditor and blame was shared for an apparent unauthorised attempt involving the American oil company to slash the disputed figure to as low as US$3m.
UK firm IHS Markit had been hired to do the first ever audit of expenses of ExxonMobil and its partners for the period 1999 to 2017 and up to April 2nd this year the report was kept hidden until Stabroek News published the details. In the six months that followed there were attempts by the government and ExxonMobil to cut the figure but that apparently ended when the Guyana Revenue Authority (GRA) wrote a damning letter to the Natural Resources Ministry saying that it wouldn’t challenge the US$214m figure and recommending that the audit be closed. That letter was also revealed by Stabroek News and appeared to have forced the government to close deliberations.
Yesterday, opposition MP David Patterson told Stabroek News that ExxonMobil Country Manager, Alistair Routledge, last week told the Opposition that government had accepted that the US$214 million sum found by the IHS Markit audit would be reduced to US$3 million, statements contradictory to government’s position on Thurs-day that it had accepted that the company overstated their expenses by the US$214 audit sum.
“They said they had completed it and they had resolved the audit issue. I went in thinking it was reduced to US$11 million but Routledge said it has been reduced to US$3 million. I was shocked. I asked him if he was sure and to confirm it. He said yes,” Patterson told Stabroek News in an interview.
“He also said they could have been reduced further because they have all their record boxes. Boxes and boxes of records, but it was time consuming so they and the government said, it was a waste of energy and manpower trying to do that [sort the boxes of documents] and they agreed to the US$3 million sum”, the MP told Stabroek News.
Patterson said that he had been rushed to attend the meeting which occurred at Congress Place last week, as only after 11 the night before the meeting AFC Leader Khemraj Ramjattan called him and asked him to attend. He said he went in with a number of questions and of top priority was seeking an update on the audit, as he had read various reports in the news that the sums had been brought down through government and company discussions.
But Vice President Bharrat Jagdeo on Thurs-day absolved government from any role in discussions, as he laid blame on the Ministry of Natural Resources for entering into discussions with the US oil major, knowing that the GRA had provided its view on the matter and said it had no-objections to the $214 million audit figure.
At a press conference he hosted at Freedom House, the Vice President was pointed to a Stabroek News report that had highlighted that a letter sent was sent by GRA Commissioner, Godfrey Statia, on his agency’s no-objection.
Last week, the Stabroek News reported that the GRA had offered a no-objection to the US$214 million in questionable claims by ExxonMobil’s subsidiary.
Stabroek News has been told that the GRA wrote to Minister of Natural Resources, Vickram Bharrat, last month advising that the audit be finalised 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 ExxonMobil’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 Exxon’s subsidiary 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 finalised 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.
Discovered
“I had this engagement again with the Ministry, and let me say, this matter should have been closed earlier. So, I thought that GRA was dealing with this matter, totally, because that is what we said, that the GRA should deal with the matter of audit. They should have a final say at the technical level. I was reluctant to even speak about it because I said it was being handled technically,” Jagdeo said on Thursday.
“So, what happened? I discovered that the GRA wrote the ministry, twice to say, we were not part of this audit so we can’t comment too much on the US$214 million and then finally they wrote back saying that , notwithstanding, given the passage of time, that was in August of this year, let us close this at US$214 million,” he added.
Jagdeo said that the ministry disregarded the letter and entered into its own discussions with the oil major.
“The ministry directly engaged in a discussion with ExxonMobil on the US$214 million after the GRA had said this was the end of the matter. So as far as I am concerned notwithstanding what I said before as that was the ministry’s position, I made it clear to them that I am accepting the GRA’s position. The GRA’s position because that was their position that this matter. They engaged in a further discussion after the GRA recommended closing the audit, and that should not have happened,” he stressed.
“I am told there was no great discussion. Only Exxon only sent in some proposals but they shouldn’t have even entertained that. So my position still stands, I will go with what the GRA has. I said to Statia [GRA’s Head] you will deal with it directly, not the ministry any longer. Nothing! nothing [they will do]. I want to make sure the GRA deals with this matter,” he added.
The Vice President, whose portfolio is oil and gas, said that he was very disappointed in the actions of the ministry.
“I am very very disappointed because that was a ministry’s decision when all along we have said we must be guided by the technical people. So it is only now this trail of letters from since January basically that went to the ministry is now emerging,” he expressed.
“My position is… If the GRA says we are getting it down to 11 or 3 that is what we will go with, if they say 214, that is what we will stick with and we close the audit and every everything else goes to arbitration. We have a disagreement,” he said.
‘Endorses’
Following the press conference, the Ministry of Natural Resources at midnight yesterday released a press release saying that government had accepted that ExxonMobil and partners overstated their expenses for the period 1999 to 2017.
The announcement by the government means that Guyana’s profit line has to be credited by US$107 million.
The decision would be seen as a major victory for the country and will add to questions about whether Exxon and partners are overstating expenses. Up to 75% of oil production each year is assigned to cover expenses.
“The Minister of Natural Resources, Hon. Vickram Bharrat, M.P endorses the position outlined by Hon. Vice President, Dr. Bharrat Jagdeo that the Guyana Revenue Authority (GRA) is the competent authority to lead all audits for expenses incurred by ExxonMobil Guyana Limited and other oil companies. Like Vice President Jagdeo, the Minister Bharrat stands by GRA’s no-objection to the US$214M in disputed costs flagged by IHS Markit in its audit of ExxonMobil’s US$1.7B in expenses incurred for the period 1999 to 2017,” the statement read.
It continued, “The Ministry’s Petroleum Unit which is assisting in the audit process had engaged in an unauthorized examination of documents submitted by Exxon. Both the Vice President and Minister Bharrat were under the impression that the information submitted to them on subsequent reductions emanated from the GRA which is not the case. The Minister wishes to state emphatically that upon learning of this development, corrective action was taken immediately and staff was instructed to cease such engagements and deliberations.”
Only this week, former Auditor General Anand Goolsarran called on government to explain why the sums had been reduced.
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, Goolsarran said that the government should explain to the nation how the decision was made.
“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 in Monday’s Stabroek News.
“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.
