Dear Editor,
It would be perfectly understandable if the public is totally confused over the issue of the audit of the expenses claimed by Esso, Hess and CNOOC for the period 1999 – 2017. Various reports in the media suggest that the UK entity contracted to audit the costs reported by the consortium were overstated by US$214 Mn.
The Stabroek News of September 16 reported David Patterson, shadow Oil and Gas Minister, as being told in a formal meeting with Mr. Alistair Routledge, the Consortium’s spokes-man, that the figure is now US$3 Mn. while the Stabroek News has reported VP Bharrat Jagdeo as stating that the figure had been reduced to US$ 11Mn. Amidst all of this, the GRA was quoted as saying that it had no objections to the figure of US$214 Mn.
Yet, on September 14, 2023, the Ministry of Natural Resources in a midnight statement claimed to accept the figure of US$214 Mn and for good measure, adding that the GRA is the competent authority to lead all audits for (sic) expenses incurred by the oil companies. First, “no objections” is neither an endorsement nor a contradiction. Second, the GRA is not the competent authority to lead all or any Petroleum audits. If that was so, why was IHS doing the audit in the first place, and not the GRA? What we are signalling to avaricious Esso, is that it can challenge not only the audit’s findings but IHS’s competence in the contractual sense to undertake the audit.
In any case, by wrongly identifying the GRA as the competent authority to carry out any audit, the Government is undermining the legal capacity of the consortium of auditors later appointed to audit the years immediately following 2017. This raises the troubling inference that the Ministry of Natural Resources, even at this late stage, seems to lack a proper familiarity with Trotman’s 2016 Petroleum Agreement. The 2016 Agreement grants to the Minis-ter the right to audit, upon 90 days’ notice, the accounts and records of the Consortium. It is entirely the Minister’s discretion and decision who he appoints although according to the Constitution and the Audit Act, the Auditor General should be his first option, capacity permitting.
Article 23 – Accounting and Audits (of the 2016 Petroleum Agreement) gives to the Minister the right to audit the Petroleum Operations while Annex C to the Agreement provides extensive provisions governing that right and the obligation of the oil companies to provide all information and explanations the auditor requires. The oil companies have the right to respond to any audit findings while the Minister has the right to carry out further investigations on any matter raised by the oil companies. Importantly, Annex C provides strict deadlines by which each party must exercise its rights or discharge its obligation.
It is not within the powers, duties or functions of the GRA to carry out any Minister’s audit. Such an audit can put it in conflict with the Revenue Authority Act and the tax laws. Those laws give the GRA an absolute right to carry out an audit of the returns and the books and accounts of any taxpayer in accordance with the tax laws and practice. The more technical among us will be familiar with the provision which allows for tax purposes only expenses wholly and exclusively incurred in the production of income and makes a clear distinction between capital and revenue expenditure. On the other hand, the Petroleum Agreement provides for recoverable and non-recoverable expenses, making no distinction between capital and revenue expenses.
The Government wants to protect and defend the 2016 Agreement – at all costs – and without a Petroleum Commission. Not only is that unfortunate, but it makes it even more important that those entrusted with the administration and execution of the Agreement read, understand, apply and enforce it.
Meanwhile, the Government must now release the IHS audit report to remove the confusion.
Yours faithfully,
Christopher Ram
