Cost oil audit: “We have acted in good faith” – ExxonMobil stands by quality of accounting activities

…full probe into unauthorised engagements to reduced figure – VP

United States oil major, ExxonMobil has broken its silence on the controversy surrounding the ‘unauthorised’ reduction of its cost oil claims, saying that it has acted in good faith and cooperated with the Guyana Government during the auditing of these figures.

Following an audit on the cost oil claims, the Guyana Revenue Authority (GRA) had supported the US$214 million sum that was initially flagged in 2019 by British firm IHS Markit when it did an audit of ExxonMobil’s cost oil expenses racked up between 1999 and 2017 from its operations in Guyana.
However, it was disclosed last week that staff from the Ministry of Natural Resources’ Petroleum Department had reportedly engaged the US oil company and reduced this figure to US$11 million and then subsequently to US$3 million.
Vice President Bharrat Jagdeo has contended that Government was under the impression that the reduced US$3 million, which he previously disclosed publicly, was determined by GRA – the technical body appointed as its sole advisor to review these audits.
Under Article 23 and Annex C of the 2016 Stabroek Petroleum Agreement, the Guyana Government has rights to conduct audits on Exxon’s cost oil claims.
In a statement on Friday, ExxonMobil noted that auditing an oil and gas joint venture operator’s expenses is a standard process by co-venturers and governments to ensure only appropriate costs are charged. It added that it is also normal for auditors to highlight focus areas by sharing a draft report that is later addressed with additional documentation.
“Our experience is that typically, very few, if any, costs are ultimately rejected, reflecting the integrity and quality of our accounting activities… We have acted in good faith and co-operated with the Government and their consultants appointed for the cost recovery audit of the 1999-2017 years.”
“We have supplied responses and documents to the issues raised in the draft audit report prepared for the Government by their consultant. We now await a formal response from the Government, after which we will enter into further dialogue as necessary,” the US oil giant detailed in its missive on Friday.
During his weekly press conference on Thursday, VP Jagdeo pointed out that while GRA has completed its review of the audited cost oil expenses in August, the entire auditing process has not been completed as yet. He noted that the Natural Resources Ministry has to now write Exxon to indicate the Government’s position on the cost oil claims, but that letter has not yet been drafted.

Full investigation
Despite this, however, Jagdeo posited that there should be a full investigation into the actions of the Ministry’s staff.
“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,” he told reporters on Thursday.
Jagdeo added, “Somebody has to give explanation how they engaged with Exxon after [GRA’s review]. And I believe also that we have to have a policy where people, at the technical level particularly, who engage with the oil and gas companies or executives, that they must seek the explicit clearance from the Minister and they must report back on the nature of every engagement – almost a Disclosure Policy.”
According to the Vice President, he intends to make a proposal of this nature to the Cabinet soon in order to ensure Government is aware of all interactions and discussions between the oil companies and staff at the technical level.
While Natural Resources Minister Vickram Bharrat has direct oversight on the day-to-day management of the oil and gas sector, he was unaware of the engagement between his Ministry staff and the oil company.
“As the Minister said, he didn’t know about it. It took place without his explicit or implicit agreement… I would want to await the full report from the Minister to the Cabinet which the Ministry would then have to disclose to the public too. At that point in time, then we’d be able to identify who all the people are, who did this unauthorised contact with Exxon and when [those meetings] took place,” the Vice President explained.
Meanwhile, despite the auditing process not yet completed, Jagdeo made it clear that Government will not be accepting any documents that were sent by Exxon after GRA wrapped its probe. On August 8, GRA wrote the Natural Resources Ministry indicating its no objection to the US$214 million in cost oil claims that was flagged by HIS Markit.
“We are not accepting anything that Exxon sent subsequent to the closure of the audit by the GRA… So, we don’t know what they sent and I am not really interested in it… I am more interested in who authorised this [reduction of the cost oil expenses] and why, after the GRA said we are closing at this stage,” the VP stressed.
The audit of cost oil claims is critical to ensuring that Guyana does not lose out on millions in oil revenues. ExxonMobil’s pre-contract costs were inherited by the current Government when it entered office in 2020. US$460 million in pre-contract costs were already written into the 2016 Production Sharing Agreement (PSA). (G8)