Guyana moving to arbitration over ExxonMobil’s US$214M cost oil claim

Vice President Dr Bharrat Jagdeo has disclosed that the Guyana Government has decided to move to arbitration with a view of settling the US$214.4 million cost oil claim that was flagged during an audit of ExxonMobil’s expenses racked up between 1999 and 2017.
At his weekly press conference on Thursday, VP Jagdeo posited that the government will not budge from its position on the disputed amount being claimed by the United States oil major.
“We can’t reach an agreement so there is a move to the next stage on the first audit. We will not reach an agreement with Exxon so we have to now go to the next stage provided for by the agreement,” he posited.
According to the Vice President, this ‘next stage’ could be in the form of a single individual mediating between Guyana and Exxon to find a solution.
“If you don’t reach an agreement there, then you go to full arbitration… We’re too far apart to reach an agreement [on the US$214.4 million claim] so we have to trigger that [process],” Jagdeo stated.

Vice President Dr Bharrat Jagdeo

Last year, Jagdeo had explained that the government may have to consider bringing in a third party – outside of what is contemplated in the 2016 Production Sharing Agreement (PSA) and agreed to by all sides – to possibly take over the arbitration process on Guyana’s behalf.
“I think you need an independent third party to deal with this. If you settle on any figure with Exxon [even at] US$200 million, you’d have somebody saying ‘Oh, we give into Exxon’ and if we settle at US$3 million, it’s worse. And therefore, you need a third party that would deal with all of these issues… a third party that everyone has faith in – the whole country. Maybe that is a route that could be explored,” he had noted.
In 2019, British firm IHS Markit conducted an audit of ExxonMobil’s cost oil expenses incurred between 1999 and 2017 from its operations in Guyana and flagged US$214.4 million as questionable costs.
Following months of its review, the Guyana Revenue Authority (GRA) – the technical body tasked with advising the Government on the audited oil expenses – supported the dispute of the US$214.4 million.
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.
Meanwhile, in February, ExxonMobil Guyana Limited (EMGL) President Alistair Routledge had told reporters that the company was in discussions with the GRA on “the next steps and what needs to be done.”
At a previous press conference last October, Routledge had expressed a preference for the figure to be settled on before it reaches the arbitration stage.
ExxonMobil’s pre-contract costs were inherited by the PPP/C Government when it entered office in 2020. In fact, US$460 million in pre-contract costs were already written into the 2016 PSA.
The audit of cost oil claims is critical to ensuring that Guyana does not lose out on millions in oil revenues.
Consequently, the Guyana Government had embarked on the second cost oil audit for the period 2018 to 2020. That process is currently ongoing.
“The second one, [Exxon was] written to by the technical agencies – not by the politicians, to give comments on the findings,” VP Jagdeo stated last week.
That audit was carried out by a consortium of local and international firms. 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 the audit.
Meanwhile, the third cost oil auditor for the 2021 to 2023 period was tendered earlier this year and that contract is now being finalised by the Guyana Government.
When the bids were opened last month at the National Procurement and Tender Administration Board (NPTAB) in Georgetown, it was revealed that Guyanese companies have again thrown in their hats in the race for this latest audit.
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. (G-8)