ExxonMobil yesterday said that it told the opposition that it believed that it had proved that the US$214 million flagged by IHS Markit was reduced to US$3 million, but did not say that government had agreed to or finalised the process.
The company also informed that the audit still has not closed and that the Guyana Revenue Authority (GRA) will reengage IHS Markit with the new documents it has found to prove that its costs are as claimed, a contention that has been dismissed by top officials who spoke to this newspaper yesterday. The last word from the GRA was that the audit was closed as far as it is concerned.
ExxonMobil has become embroiled in controversy over the unauthorised discussions with the Ministry of Natural Resources to reduce the disputed figure – which would have resulted in less profit coming to Guyana – and a dispute over what exactly it told the opposition about the matter.
“What I provided by commentary to the Leadership of the Opposition who I went to meet, as part of our open- door policy, [because] we want to engage, not only across the political spectrum but also other people in society, is that we had been going through this process. As I described, with the working level in the ministry, …we believe that we have provided the documentation to substantially reduce the queries that were there from the initial draft audit. And that it was at that sort of level,” ExxonMobil’s Head here, Alistair Routledge told a press conference yesterday when asked about the interaction with the opposition.
“We did not have any formal agreement from the ministry, and indeed, as the ministry, the minister and the Vice President made clear, there is the expectation that the GRA is the ultimate authority on that. So just to be clear, I did describe the process to the opposition but I did not say that we’ve reached final agreement that was authorised by either the GRA or the ministry. We have not finalized the audit process,” he added.
Commentators have been baffled that ExxonMobil was able to provide documentation to the Ministry of Natural Resources but not IHS Markit.
Last month, Opposition Member of Parliament, David Patterson, told Stabroek News that Routledge 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 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 had 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.”
Attention
Vice President Bharrat Jagdeo told a press conference last week that the President had also spoken to ExxonMobil and the company denied ever giving the Opposition such information.
This triggered the five Opposition members present during the September meeting to write a letter, insisting that the company did say that government agreed to the cost reduction from US$214 million to US$3 million and are of the view that the United States oil major should make its position public.
The ExxonMobil Country Manager who started working here in July of 2020, said that the company wanted to clear the air on the issue that “has received so much of the attention”, and pointed out that the time of the audit influenced the company’s ability to produce the documents to IHS Markit.
Routledge was probed about the possibility that what the Vice President said was indeed what the company had relayed and he replied, “That is correct. It was a working discussion on documentation. It was not in any way a final agreement.”
Among IHS Markit’s audit’s findings were that some US$214.4 million in claims are questionable and recommendations were made that government should challenge the claims. In addition, it said enough was not done to keep the Government of Guyana (GoG) apprised of the activities and costs associated with the development.
“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 stated
The disputed costs fall into three main categories – Defined Costs for Removal (DCR), Inadequate Supporting Documentation (ISD), and Ministerial Approval Required (MAR). The breakdown is as follows: DCR US$34 million, ISP $179.8 million, and MAR US$0.27 million.
‘Defined Costs for Removal’ amounts 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.”
Explaining the period covered and giving a breakdown of the sums scrutinized, IHS said that it had been engaged by the Government of Guyana (GoG) to independently audit the cost recovery claim submission by Esso Exploration and Production Limited (EEPGL) for the period between 1999 and 2017 within the Stabroek Contract Area that amounts to a total of $1,677,774,727 in accordance with the prevailing Production Sharing Agreement(s).
Additional documents
And that since the expenses were from 1999 to 2017, Routledge said that the long period made it difficult producing all the documents when it was asked for.
“I think one thing should be remembered from all of this is not only it covers a period that covers back more than 20 years ago. That process kicked off under a different administration when we still had the Department of Energy,” he posited.
He said that what ExxonMobil had received from IHS Markit was “a draft report which had an amount of money that was queried… this was the queried amount of $214 million.”
When the government changed and the company reengaged with the Ministry of Natural Resources. “What we have done over the past many months is provide additional documents. What we had to do was go through archive boxes and things of that nature, to find the right pieces of paper to provide those documentation in support of those expenses,” he said.
The process, according to Routledge was tedious but the company, nonetheless continued the process. “Some of what we are seeing is a long period to go through that query process for us to dig through the documents. We had been doing some of that with the ministry which caused some of the confusion,” he said.
Questioned on who initiated the IHS Markit discussions and the disputed $US214 million sums, Routledge said that the amount isn’t a disputed figure as there has been no finality on how much the audit is.
On initiation, he said that it was Ministry of Natural Resources Petroleum Director, Gopnauth ‘Bobby’ Gossai who started it, and that the company did not know that the ministry was not the agency selected by government to be its representative for the audit.
“This is not a dispute. It is queries, to say we have these questions can you please provide the documentation to support. And if we are unable to do that then that should be taken off of the cost recovery. But that is what we are doing; finding the documentation to support what we believe are all valid costs. So I would not dispute a process where the right technical people should look at it. Under the agreement, the ministry is officially the contact point. But as the contract makes clear, the government can choose who it wants…it wants the GRA to be the point of contact. So that is who we are working with,” he expressed.
“Remember the history. This started under the previous administration; the department of energy then the ministry picked it up so they provided us the report from IHS market. So it came to us from the ministry, the report from IHS Markit, and then we had been providing responses to whoever needs to review those. He [Gossai] was asking to provide the documentation we were not aware of who all might be reviewing it,” he added.
Routledge emphasized that,” the process is very clear [now] it is to be with the GRA”.
Behind closed doors
He further noted that the company believed that the ministry was also engaging with the GRA. “What we understood was the GRA was engaging with the ministry. We don’t know what is happening behind the doors of the government between them and GRA so I can’t really tell you anymore. What has been clear now is the GRA [is responsible].
We were working with the ministry and we understand that the GRA was on their side,” he said.
And now that he believes that the company will be given another chance to prove and validate the US$214 million questionable sum and that the GRA is the final say for government, Routledge was asked if GRA stands by the sums if ExxonMobil will abide with its decisions or go to arbitration.
He said that while he would not guess on the way forward, he believes that arbitration would not be good for any side and hopes there is an amicable resolution.
“I can’t say at this time because I don’t know how the conversation is going to go and where the evidence will sit on all of those so. We will follow the process through,” he said.
“My distinct view is not to go to arbitration I don’t think that helps either side because it should be clearly what the roles are and what is acceptable and what’s not and we have the documentation to support. To me it’s really a last resort if we end up in arbitration. We shouldn’t end up there,” he added.
