ExxonMobil lumped all of the expenses for the construction of the multibillion dollar Ogle Headquarters, upgrades for its Duke Street office and the Houston Shorebase, under the Stabroek Block’s cost recovery and this should not be, as the company will use the facilities for operations of other blocks, the US$7.2 billion audit of its 2018-2020 expenses has stated.
As it pertained to Capital Expenditures and Shared Costs, the audit said that facilities that serve all Guyana blocks were charged 100% to Stabroek, including, the new Ogle office complex construction, Duke Street office improvements, and shorebase expansions.
“The contractor was clear that Stabroek should pay for 100% of the cost…” the audit said as it pointed out that the company’s rationale was that without the Stabroek block, the in-country footprint would be minimal and there would be no need for a new office.
“We disagree with the contractor’s opinion; allocation of costs should follow operational usage, regardless of the size of the different operations. Smaller operations should not be relieved of their obligation to pay a share of the capital costs,” the auditors argued as they flagged those costs.
The auditors explained that ExxonMobil charged 100% of to-date construction costs to Stabroek for Ogle when the Production Sharing Agreement clearly defines that although office buildings are considered a general and administrative expense it is recoverable and the costs should be split between all of the company’s blocks here.
General and administrative costs cover all local offices, including but not limited to supervisor, accounting and employee relations services, but which are not otherwise recovered. Therefore, the Ogle construction costs are recoverable, but the costs should be allocated between all Guyana blocks because the office will serve all Guyana operations, the audit said
“Further, by charging 100% of the construction costs as incurred, the contractor is essentially having the Government of Guyana fund the construction of EEPGL’s expansive Ogle office complex; that does not align with usage for petroleum operations,” the report stated.
And when the company had the Duke Street office it rents from a popular city businessman upgraded, it charged “100% of Duke Street office upgrade and remodel costs to Stabroek, because the contractor considered the costs as capital costs.
“While the upgrades were needed to support Guyana operations, they benefited all Guyana operations as acknowledged by the monthly allocation of operating expenses. These upgrade costs should also be allocated, regardless of whether they were capitalised,” the audit said.
Pointing to similar lumping, the Guyana Shorebase Inc (GYSBI) operation was also singled out for charges that all went to the Stabroek Block Expenses when it should be shared as the operation supports all of those blocks. “The contractor charged Stabroek 100% of the cost to upgrade various facilities at the GYSBI…,” the audit said
“…These are direct and indirect expenditures in support of the petroleum operations including but not limited to warehouses, piers, marine vessels, vehicles, motorised rolling equipment, aircraft, fire and security stations, workshops, water and sewage plants, power plants, housing, community and recreational facilities and furniture, tools and equipment used in these activities and safety and security services,” the audit said.
Service costs in any calendar year shall include the total costs incurred in that year to purchase and/or construct said facilities as well as the annual costs to maintain and operate the same.
But while these facility upgrade costs are allowed as a recoverable Stabroek cost in the year they are incurred, the RVE team said that “they should be accumulated and allocated in subsequent periods to Canje and Kaieteur blocks because those operations have used and will continue to use these facilities.
In February this year, ExxonMobil made clear that cost oil will fund the construction of the Ogle Headquarters but did not say all of those sums would be deducted from the Stabroek Block accounts.
“It will be the operating centre for the offshore operations… it’s there solely in order to support the operation. So the costs will be recovered. And the cost recovery mechanism, that’s been clear all the way along with the previous administration and with the current administration, as we set up the project,” Country Manager Alistair Routledge had told a press conference .
Assuring that the $33 billion building would not be a palatial office, Routledge said that spending was prudently being monitored to provide a fit-for-purpose and functional space. He informed that the company provides the government with monthly updates on the progress of works.
“It was budgeted [at] just under US$160 million, and it’s been benchmarked. And you know, we do have monthly reporting to the Minister of Natural Resources on the construction costs and benchmarking. It’s a very competitive one locally and even internationally, on efficiency of the development,” he said.
“It’s not going to be some, you know, some fancy [building with] lots of glass on the inside. This is a fit-for-purpose development, inside of a very functional [building] with all the technology,” he added.
Through a sublease arrangement, ExxonMobil will construct its state-of-the art corporate headquarters on 10 acres of land leased to Ogle Airport Inc (OAI) by the Guyana Lands and Surveys Commission. Then Head of the National Secretariat of the Guyana Extractive Industries Transparency Initiative Dr Rudy Jadoopat had said in 2019 that the organisation had not been privy to the cost of the agreement between Exxon-Mobil and OAI for the lease of land for the oil company’s corporate head office.
The company has said that the state-of-the-art campus will be constructed on a greenfield 15-acre site comprising two buildings, associated infrastructure and a net zero energy footprint. The plans also include the construction of a roadway as the designated site has no road access.
Chartered accountant Christopher Ram has said that while Exxon said it would charge the building under cost oil, it had been silent on whether it was “properly authorised to hold land in Guyana.
“Unless Guyana gets modern petroleum legislation under the supervision and administration of an independent Petroleum Commission, our country will continue to lose out on its fair share of petroleum revenue. Sadly, that does not appear on the horizon,” Ram had said.
The 2024 completion target for the building remains on schedule.
