Auditor General collaborating with GRA for cost oil claims audit – Jordan

…says Govt looking towards external assistance

While the Government of Guyana will place much reliance on the help it gets from its external partners to audit ExxonMobil’s cost oil claims, Finance Minister Winston Jordan has said the Audit Office does have an input in these activities.
In an interview with Guyana Times on the sidelines of an event on Sunday, Minister Jordan was asked for an update on Government’s audit of the US$460 million pre-contract costs claimed by Exxon in its contract with the Guyana Government.
“We are trying to get some help out of the Department of Energy. They are supposed to be helping [the Guyana Revenue Authority] GRA and the Auditor General’s Office to source input for these (initiatives), bearing in mind we don’t have any expertise in these areas.”
“Also, expertise doesn’t come cheap,” he added. “Therefore, we’re looking forward to financial assistance from the World Bank and the IDB to help us establish these agreements, in terms of getting people and (other requirements) and so on.”
After its 10th discovery of oil in the Stabroek Block, ExxonMobil has estimated the recoverable resource in the block to be five billion oil equivalent barrels. At US$50 a barrel, that equates to well over US$200 billion. In addition, an independent assessment, or competent persons report, had found that 2.9 billion barrels of oil existed in the Orinduik Block.
Exxon is expected to use revenue from its production in order to recoup its capital investment. Whatever remains of this is the ‘profit oil’ Guyana will have to split with the oil company and its associates.
According to Annex C of the Production Sharing Agreement (PSA), Guyana signed with Exxon, pre-contract costs “shall include four hundred and sixty million, two hundred and thirty seven hundred thousand and nine hundred and eighteen United States Dollars (US$460,237,918) in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015.”
Exxon is expected to use revenue from its production in order to recoup its capital investment. Whatever remains of this is the ‘profit oil’ Guyana will have to split with the oil company and its associates.

Preparation
A burning question had been what preparations Government would make for oil and gas and auditing these costs, in the recently presented 2019 Budget. It turns out that a total of $333.2 million in capital funds was allocated by the Government for Petroleum and Energy Management.
The estimates also detail that current expenditure, which among other things will go towards employment and other recurrent costs, was $90.9 million. Specifically, wages and salaries are expected to cost the Treasury $20.5 million.
According to the budget estimates, however, only three positions are currently filled in the Department of Energy. In addition, the estimates show that all these employees are employed on a contractual basis.
$43.3 million is earmarked for ‘other goods and services purchased’. Under this heading, $30.3 million will be spent on security services, while $5 million will be spent on training that includes scholarships. Under a heading named ‘other’, a sum of $12 million is earmarked.
Meanwhile, $100 million is earmarked for building expenses; $200 million for institutional support for the oil and gas sector; $28 million for purchasing vehicles and the remainder for the purchase of furniture and equipment.