Govt backs GRA’s no-objection of disputed US$214M cost oil claim

– VP Jagdeo says arbitration available for any disagreements

The People’s Progressive Party/Civic (PPP/C) Government is insisting that the Guyana Revenue Authority (GRA) is the body responsible for auditing the cost oil expenses of ExxonMobil and as such, is supporting its no-objection to the disputed US$214 million cost oil claim submitted by the United States oil major.
In 2019, British firm IHS Markit did an audit of ExxonMobil’s cost oil expenses racked up between 1999 and 2017 from its operations in Guyana and flagged some US$214.4 million disputed cost oil claims.
Following an audit on the cost oil claim, the GRA upheld the disputed US$214 million.

However, the Government had previously reported that this figure was further reduced, first to US$11 million and then subsequently to US$3 million.
But Vice President Bharrat Jagdeo on Thursday explained that those reductions were arrived at when the Natural Resources Ministry engaged Exxon even after GRA had recommended closing the audit with the US$214 million disputed sum.
Nevertheless, Jagdeo contended that the GRA has total oversight on auditing cost oil claims and should have the final say at a technical level.
“The Ministry directly engaged in a discussion with ExxonMobil on the US$214 million after the GRA had said this was the end of the matter… My position still stands, I will go with what the GRA has. I said to [GRA Commissioner General Godfrey] Statia that you will deal with it directly, not the Ministry any longer – nothing. I want to make sure that the GRA deals with this matter. I’m very, very disappointed because that was a Ministry decision when all along we said that we must be guided by the technical people,” the Vice President told reporters at a press conference on Thursday.

However, later that evening, the Natural Resources Ministry issued a statement in which Minister Vickram Bharrat endorsed that GRA is the competent authority to lead all audits for expenses incurred by ExxonMobil Guyana Limited and other oil companies.
Consequently, Minister Bharrat said he stands by GRA’s no-objection to the US$214 million in disputed costs flagged by IHS Markit in its audit of ExxonMobil’s US$1.7 billion in expenses incurred during the 18 years.
The missive detailed that the Ministry’s Petroleum Unit, which is assisting in the audit process, had engaged in an unauthorised examination of documents submitted by Exxon.
According to the statement, “Both the Vice President and Minister Bharrat were under the impression that the information submitted to them on subsequent reductions emanated from the GRA, which is not the case. The Minister wishes to state emphatically that upon learning of this development, corrective action was taken immediately and staff was instructed to cease such engagements and deliberations.”
But VP Jagdeo on Thursday maintained that the Ministry should not have even engaged Exxon on this matter. In fact, he said that based on information relayed to him, there was no discussion on the matter and that Exxon only sent in some proposals to the Ministry.
“But they shouldn’t have even entertained that,” the Vice President insisted, adding that any disagreement would be dealt with accordingly.
“If GRA says we’re getting it down to 11 or 3 [million USD], that’s what we will go with it. If they say it’s 214 [million USD] that’s what we will stick with and then we close the audit. And then everything, thereafter, goes to arbitration [if] we have a disagreement,” Jagdeo stated.
Previously, the Vice President had said that the US$214 million cost oil claim will not be allowed if Exxon cannot justify it.
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).
According to the contract, the 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 in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015.”
There is an additional sum of approximately US$400 million from 2016 to 2017, which it is believed will also come under the rubric of cost oil. The former APNU/AFC Government has received much criticism for agreeing to these costs without an audit being done.
The former coalition regime had contracted IHS Markit, at a cost of US$300,000 ($62.6 million) in 2019. The contract had to be extended in May of 2020 without cost, owing to the COVID-19 pandemic.
IHS Markit is the product of a 2016 merger between two companies, United States (US)-based IHS and London-based Markit. Its data and information services business caters to industries such as automotive, energy, financial services, defence, and maritime.
The company is no stranger to Guyana’s oil sector, having published a number of write-ups and analyses on Guyana’s efforts to develop its capacity. This includes “Guyana’s deepwater areas will remain competitive, despite changes to fiscal terms (IHS Markit, 2018)” and “How activity in the Guyana mini basin is booming with five exciting discoveries since 2015 (IHS Markit, 2017)”. (G-8)