Energy Department prepared to reject wasteful cost oil claims

…audit contract likely by March

The Department of Energy on Monday made it clear that it is prepared to reject any expenses deemed to be wasteful that were included in ExxonMobil’s cost oil claims to Guyana.
This was communicated by special advisor to Guyana’s Energy Department, Matthew Wilks, in its first press conference for the year at the Ministry of the Presidency.
According to Wilks, the whole point of having the cost oil claims audited is to weed out wasteful expenditure.
“Let me put it bluntly. If anyone tries to charge costs which are unwarranted or not benchmarked to norms by being excessive, the Department will reject them. That is the purpose of cost recovery audits. It’s not merely to sign off on costs; it’s to say no under the right circumstances.”
Wilks made it clear that some costs will be turned down, once found to be excessive. The advisor explained that this is always an understanding in oil and gas exploration and that the Department has no compunction with saying no to Exxon.
“So no will be said…when we look at costs, that’s the whole purpose of getting qualified companies in who have experience in auditing, who have benchmarking capabilities, is so they can look at the costs, they can benchmark them and tell the Government if the cost is excessive or in the right order.”
“If anything is excessive and there is no good reason for it being there, it will be disallowed. So if an operator expends too much, or doesn’t seek cost efficiencies, it might be spending its own money and not the Government.”
Meanwhile, Energy Department Head, Dr Mark Bynoe noted that out of 13 firms interested in the cost oil audit, five have been shortlisted. He said that the Department is awaiting their technical and financial proposals for further evaluation. Bynoe was optimistic that this contract would be awarded by March of this year.
The ExxonMobil Production Sharing agreement stipulates that the oil company has to recoup over US$400 million from oil and gas revenue.
After its 10th discovery of oil in the Stabroek Block, ExxonMobil has estimated the recoverable resource in the block to be 5 billion oil equivalent barrels. At US$50 a barrel, that equates to well over US$200 billion. In addition, an independent assessment, or competent persons report, had found that 2.9 billion barrels of oil existed in the Orinduik block.
Exxon is expected to use revenue from its production in order to recoup its capital investment. Whatever remains of this is the ‘profit oil’ Guyana will have to split with the oil company and its associates.
According to Annex C of the Production Sharing Agreement (PSA) Guyana signed with Exxon, pre-contract cost “shall include four hundred and sixty million, two hundred and thirty seven hundred thousand and nine hundred and eighteen United States Dollars (US$ 460,237,918) in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015.”