Guyanese consortium wins contract for 3rd cost oil audit

…as ExxonMobil Guyana says arbitration on 1st audit a “last resort”

VHE Consulting – the Guyanese consortium that did the second cost oil audit on ExxonMobil Guyana spanning 2018 to 2020- has won the contract to conduct the third audit into the United States (US) based oil major.

According to information released by the National Procurement and Tender Administration Board (NPTAB), VHE Consulting was awarded the $312.6 Million contract, issued by the Natural Resources Ministry, on October 10.
Last week, Vice President Bharrat Jagdeo had said that the contract would soon be before Cabinet for approval. 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 NPTAB in Georgetown, it was revealed that the three bids came from a mixture of Guyanese and foreign companies.
VHE Consulting had submitted a bid to the tune of $229 million. The second bid came from London-based Grant Thornton 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 was a joint venture of local Guyanese firm, N.Sookhai & Company and the Nigeria-based Infoworks Solutions Ltd.
With regards the second audit, covering the years 2018 to 2020, Vice President Bharrat Jagdeo had explained in May that the government is still verifying certain details in the audit. This second audit was carried out by a consortium of local and international firms.
Guyanese firms Ramdihal and Haynes Chartered Accounting, Vitality Accounting and Consultancy, and Eclisar had partnered with Oklahoma-based Martindale Consultants and Swizterland-based SGS to conduct the audit. Haynes Chartered Accounting is headed by Professor Floyd Haynes, who is also the founder of the New Hayven Merchant Bank.

Arbitration
ExxonMobil Guyana has meanwhile expressed reluctance to invoke the arbitration provision in the Stabroek Block agreement, over the disputed findings in the first cost oil audit, done by British firm IHS Markit. According to ExxonMobil Guyana President Alistair Routledge, arbitration is a last resort.
During a recent press conference, Routledge was asked for an update on the first cost oil audit, in particular the dispute over costs. The first audit was done in 2019 by IHS Markit, covering the years between 1999 and 2017.
In that audit, some US$214.4 million was flagged as questionable costs. Following months of its own review, the Guyana Revenue Authority (GRA) – the technical body tasked with advising the Government on the audited oil expenses – supported the US$214.4 million disputed sum. According to the oil executive, his company is still in talks with GRA over this audit. As he put it, an exchange of information is ongoing between the two parties.
“We are continuing the work on the cost audits. We’re still in discussion, exchange of information with the GRA as the appointed, authorized entity to work with us on the audit. Be it the first, second or indeed the approaching third audit of the Stabroek cost bank,” he said.
According to Routledge, he has no intention at this point in time, to go to arbitration over this US$214.4 Million sum. While the provision is there, he explained that arbitration would only be a last resort for the company.
“I don’t have any intent to call on an arbitration. I don’t think an arbitration, that’s the right way to get to resolution. But at the end of the day, its laid out in the petroleum agreement,” Routledge explained.
“Ultimately the next, logical step would be to involve an independent expert. If we can’t resolve that way there is the provision for arbitration. But arbitration is generally a last resort and quite expensive process.”
This comes even as Exxon is currently embroiled in another arbitration process, this time in conjunction with CNOOC against Chevron’s efforts to takeover Hess Corp’s Stabroek block stake.
Back in October 2023, it was announced that Hess Corp. had agreed to merge with Chevron. This deal would allow Chevron to buy into Hess a 30 per cent stake in the oil-rich Stabroek Block, which is operated by ExxonMobil, which has the majority interest of 45 per cent while CNOOC holds the remaining 25 per cent stake.
However, in March, ExxonMobil announced that it had filed a case in the International Chamber of Commerce to assert its right of first refusal over Hess’ interest offshore Guyana. Exxon is claiming a right of first refusal on Hess’ assets in Guyana under a joint operating agreement that governs a consortium that is developing the South American nation’s prolific oil resources. The oil major filed for arbitration in March at the International Chamber of Commerce in Paris.
It was reported that Exxon and CNOOC had merged their arbitration claims against the takeover. Hess for its part has said that it will “vigorously defend its position” to have the deal, worth approximately US$53 Billion, go through. (G3)