Contract for 3rd cost oil audit to be signed next month – Bharrat

…says Govt not accepting any disputed expenses in cost bank

The government is on track to sign the contract for the third cost oil audit of ExxonMobil’s expenses, covering the 2021 to 2023 period, an important step towards the goal of making the audits current.
In his first press conference for the year, Natural Resources Minister, Vickram Bharrat on Wednesday also revealed that the government’s intention is to have the contract go to a local consortium, in partnership with international companies.
“We’re well on course to sign that in a month, in September. Again, we’re looking at the same model (as the second audit) where we can have the local consortium partner with international companies or a company. So, we can build capacity,” Bharrat said.

The contract for the third cost oil audit for the 2021 to 2023 period was tendered earlier this year. When the bids were opened in March at the National Procurement and Tender Administration Board (NPTAB) in Georgetown, it was revealed that Guyanese companies did indeed throw their hats in the race.
VHE Consulting – the same Guyanese consortium that did the second audit (2018 to 2020) – had submitted a bid to the tune of $229 million. The second bid came from London-based Grant Thorton UK LLP and PFK Barcellos Narine & Co, which did not have a bid price at the time.
Priced at $202.8 million, the third bid is a joint venture of local Guyanese firm N Sookhai & Company and the Nigeria-based Infoworks Solutions Ltd.

2018-2020 audit
Bharrat meanwhile hit back at concerns that have been expressed regarding the findings in the 2018-2020 audit done by a consortium of local and foreign audit firms, that some costs had been overstated.
Guyanese firms Ramdihal and Haynes Chartered Accounting, and Professional Services Firm Vitality Accounting and Consultancy Inc., and Eclisar Financial & Professional Services had partnered with Oklahoma-based Martindale Consultants Inc. and the Swiss technical company SGS to conduct that audit.
However, while there had been criticisms that the government seemed not to be taking any action on the findings, the minister explained that the government had to await the final report before any action could be taken.
“The purpose of the audit is to look at whether Exxon is using revenue in the Canje and Kaieteur block, but is being added to the Stabroek cost bank. In fact, rather than carrying negative statements, the auditors should be commended for finding these inaccuracies, of seeing expenses in the Canje and Kaieteur block, under the Stabroek cost bank.”
“And to say that we are not doing anything about it is unfair, because there is no final report on the second audit as yet. It simply means we’ll take that cost out of the cost bank, before any final report is produced. There is no way the government will accept expenses from Canje and Kaieteur, in the Stabroek cost bank,” Bharrat made clear.
The Guyana Revenue Authority (GRA) had flagged inaccuracies in declarations made by a Trinidadian logistics company that acted as the broker on oil well equipment imported for ExxonMobil. It was reported that the company, in submitting the declaration, had listed US$4.4 million worth of oil well equipment as a whopping US$12.1 billion.
This revelation had prompted government to take certain steps to ensure this was a one-off incident, with Vice President Bharrat Jagdeo explaining that GRA would be checking previous invoices to see whether this was a one-off occurrence.
“We’re now ensuring that before we finalise any of the [cost oil] audits – the second audit, the GRA will go back and check all the back-invoices for the past several years, to see that there’s been no overstatement on any of these invoices. This is a serious matter, and we’re taking it seriously,” the Vice President had said back in May.
ExxonMobil Guyana, for its part, had claimed that it was a typographical error that caused the worth of the equipment to be overstated in November 2023. Further, the oil company had said that it had cut ties with the supplier and had beefed up its internal systems.
And in response to a March 18, 2024 letter from GRA, asking it to show cause why proceedings should not be instituted against it, Exxon had committed to working along with GRA to address any further concerns on the matter. However, Jagdeo had said in May that GRA had proceeded to file legal proceedings over the US$12.1 billion overstatement for the oil well equipment.

Other audit
When it comes to the first cost oil audit, British firm IHS Markit had flagged US$214.4 million as questionable costs of ExxonMobil’s expenses incurred between 1999 and 2017 from its operations in Guyana.
Government had subsequently declared its intentions to move to arbitration to settle this disputed amount being claimed by the US oil major. And according to Bharrat, there is nothing sinister regarding the government’s handling of this matter, making it clear that the money will be removed from the cost bank, provided the matter does not reach arbitration.
“In terms of the audits, the first audit as you know… we have closed that. At the US$214 Million figure. Based on advice, we would have written Exxon, saying this is the final report. We are awaiting the response. I think there’s a time period for that response. And then we’ll take it from there.”
“But from the government’s perspective and our position, is that the final report has been closed off. And the US$214 Million. Let me stress too, not only for the media but for the viewers as well, that there was this perception and allegation, against myself. The Vice President, staff members, that there is some kind of sinister motive behind the whole issue of that first audit.”
Bharrat explained that in the first instance, the audit had nothing to do with exchange of payments, but merely the verification of payments made. He made it clear that neither he nor his ministry benefited from any money from the oil company.
“So, when we say its US$214 Million, it doesn’t mean in any way that US$214 million will be transferred from Exxon to the Ministry of Natural Resources. It doesn’t work like that. That’s not how audits work. It simply means that US$214 Million, once we agree, will be removed from the cost bank. It means the country doesn’t have to pay back that US$214 Million.”
“It’s just writing off the amount from the cost bank. That’s the only transaction involved there, where once the government says this is the final amount, Exxon agrees and we don’t go to arbitration, then the US$214 Million comes out of the cost bank. The cost bank is reduced.”
Following months of review, GRA – the technical body tasked with advising the government on the audited oil expenses – had supported the dispute of the US$214.4 million, as flagged by IHS Markit.
Based on the 2016 oil contract that was signed between ExxonMobil and the then A Partnership for National Unity/Alliance For Change (APNU/AFC) Government, Guyana will have to incur the cost of the oil company’s legal fees should the matter go to arbitration. And according to Bharrat during his press conference, the government prefers to avoid arbitration if possible.
“We’re hoping this matter can be resolved amicably, between the two parties. And that we don’t reach the stage of arbitration. If we’ve got to go to the stage of arbitration, we’ll have to do it. Because its US$214 Million we’re talking about. And if it costs us 1/10 of that, it makes perfect sense,” Bharrat said. (G3)