Jagdeo: “Somebody has to give explanation how they engaged with Exxon and we have to have a policy with people who are at the technical level”
President Irfaan Ali has ordered that an investigation be swiftly conducted to determine who authorised personnel at the Ministry of Natural Resources to bypass advice from the Guyana Revenue Authority (GRA) and enter into direct negotiations with ExxonMobil to reduce US$214 million in questionable claims flagged by IHS Markit to US$3 million.
“I spoke with President Ali and I agree that there should be a full investigation of this matter and the Minister (of Natural Resources) still has to give a full report to the cabinet on what took place,” Vice President Bharrat Jagdeo yesterday told a press conference.
He added, “Somebody has to give explanation how they engaged with Exxon and we have to have a policy with people who are at the technical level, and who engage with executives, that they must seek explicit clearance from the Ministry and report back on the nature of the engagement; almost a Disclosure Policy.”
Stating that the investigation will be detailed and that he will disclose the names of the persons who were involved, Jagdeo said that while Minister of Natural Resources, Vickram Bharrat has direct oversight, he has also said that he did not know that the US$3 million figure was not given by the GRA but his own staff.
“I would await the full report. Then we will be able to identify who all the people are with Exxon and when [those meetings] took place,” he stressed.
As for the US oil major that has had global accusations about duplicity levelled against it, the Vice President said that government was not accepting any documents or explanations where the agreement came from the ministry’s Technical staff. “We are not accepting anything Exxon sent, subsequent to the closure by the GRA. We don’t know what they sent and I am not really interested in it. I am more interested in who authorised this and why they did, after the GRA said we are closing at this stage,” he stressed.
According to Jagdeo, the GRA had written the Ministry of Natural Resources and gave its no-objection to the US$214 million stated, but this information was not channelled back to him. Minister of Natural Resources Bharrat told him that he [Bharrat] thought that when his staff gave updates on the negotiations with Exxon, it was from a position sanctioned by GRA.
“Reports were lodged with GRA to review. The GRA has to advise the government, and only the GRA, as to what we should conclude the audit on. They did so…,” he said making reference to the letter sent by GRA to government.
“Subsequent to that, Vickram Bharrat and I sat in a meeting where the staff said to us that the [US$214M] figure had come down to US$3M. That is what we reported here,” Jagdeo said.
“…The Minister himself said… although we sat in the meeting, although he has line responsibility, he thought this was GRA’s position,” Jagdeo noted while stressing that the GRA has the final say.
He acknowledged that had it not been for the Stabroek News’ report on the issue, the issue might not have been brought to the fore.
The Vice President emphasised that the Ministry of Natural Resources held discussions with ExxonMobil Guyana on the US$214 million after GRA instructed to end the auditing process.
“We discovered it largely because of how transparent we have been. You could recall when Stabroek News raised this matter of the slothful conclusion of these audits and I said that in this particular matter we will not get ourselves involved as politicians, since it is solely for the technical staff at the Guyana Revenue Authority (GRA), they have to deal with it,” he said.
“We know that the 2016 PSA (Production Sharing Agreement) has vested the Authority to conduct audits and pursuant to that the Minister has hired IHS Markit under APNU and then the consortium under the People’s Progressive Party to audit the post 2017 costs,” he detailed.
He made clear that while his job portfolio covers oversight of the petroleum sector, it is strictly from a policy perspective.
“I do not have a single staff in the Office of the President in this oversight role in the oil and gas sector. I deal with policy not implementation on policy and I have to rely on reports from the sector on implementation matters. So when we discuss, for example the reform agenda that we promised, the local content law… that is policy I dealt with from my office,” he said listing legislation and policy decisions taken.
“I am not charged, and I don’t want to be, with the daily implementation of any of these issues. We have to work based on reports. When I come to this press conference I come with a report from the ministry,” he added.
Jagdeo said that going forward, the audit is still not complete and the Ministry of Natural Resources will now formalise the closing by informing ExxonMobil of its decision. “That is why we believe there should be a full investigation, we have not concluded the audit as yet because now the Ministry has to write Exxon a letter stating their position on the matter,” he said.
Asked if there were any indications by GRA that they were aware of the ministry’s action Jagdeo said no. It is unclear who will be conducting the investigation.
Background
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 letter to the Natural Resources Ministry saying that it wouldn’t challenge the US$214 million figure and recommending that the audit be closed. That letter was also revealed to the public by Stabroek News and appeared to have forced the government to close deliberations.
Last week Shadow Minister of Natural Resources, David Patterson, told Stabroek News that ExxonMobil Country Manager, Alistair Routledge, informed the Opposition that the 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 Thursday 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.”
Stabroek News has been told that the GRA wrote to Minister of Natural Resources, 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.
Since the letter was sent, there has been no word from the Ministry of Natural Resources on the matter.
The Ministry of Natural Resources in a press statement recently said the 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 ministry release read: “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”.
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.”
Former Auditor General Anand Goolsarran in his weekly column Accountability Watch had called on the 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 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 totaling 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.
ExxonMobil has thus far remained silent on the matter.
