Preliminary work completed on 2nd Exxon audit of US$9B cost oil – VP Jagdeo

– assures Govt has been pushing for timely completion of audits

Preliminary work has been completed on the second Esso Exploration and Production Guyana Limited (EEPGL) cost oil audit of expenses totalling US$9 billion, which was being undertaken by a consortium of local companies.
This was recently revealed by Vice President Bharrat Jagdeo, during a press conference where he defended against criticism by the Opposition A Partnership for National Unity (APNU). The Opposition has been claiming that the first audit of ExxonMobil’s pre-contract expenses was kept secret by the People’s Progressive Party/Civic (PPP/C) Government.
Jagdeo noted that not only was the first audit contracted when APNU was in office and therefore should have been public knowledge for the Opposition, but the PPP/C Government has also expedited work on the second audit.
“The audit was contracted by the PNC… the second audit, we made it clear why we wanted local content. And the second audit has been done. The preliminary work is completed now and it has to go through all of that.”
The Vice President acknowledged that the criticism of the length of time it takes to complete the cost oil audits is a fair one. Jagdeo assured that at the policy level, they ensure that they press the technical people to complete their audits in a timely manner.
“We as policymakers, press the technical people too. To get this going, complete the work. We have a ton of things to do, from the policymaking side. We cannot be running technical issues all the time; you hire people to do that. So, it’s going slowly, but it’s getting the required attention at the technical level.”
“What would have been even more distressing is if our GRA or our Ministry had just said, all right we accept it and let’s go forward. Or allow Exxon to get away with some spurious explanation. It’s taking long, but they’re sticking doggedly to it. And we’re not going to lose a single dollar,” Jagdeo said.
According to Jagdeo, the Guyana Revenue Authority (GRA) and the Ministry of Natural Resources have had the first cost oil audit in their hands for some time and thus allegations of secrecy are baseless.
“This audit has been available between the GRA and the Ministry of Natural Resources, to a minimum of 20 staff for the last two years. They’ve had this audit. So, it’s not a secret. It’s in GRA and they’ve had maybe 12-15 persons who’ve been looking at this audit. So around 20 technical staff had copies of this audit and looked at it. So, we don’t accept that it’s secret.”
“The sloth in addressing the concerns is accurate. It’s going too slowly. But we’re not going to lose… billions of dollars. The reason you can’t lose billions of dollars is because the audit itself says that there’s about $200 million of expenditure that is being challenged… you can’t lose it because it’s been identified as potentially a source that if Exxon can’t give proper explanations, will be removed from the cost bank and go back into the profit share. It’s not money you will lose. It’s just that the country will recover it. That is the purpose of the audit.”
The US$751,000 cost recovery contract for the second audit, which covers profit oil from the years 2018, 2019, and 2020, was signed in a room full of stakeholders and suppliers last year May, during a workshop on local content.
The local auditors include Ramdihal and Haynes Chartered Accounting, as well as Vitality Accounting, who was present at the signing. Chateram Ramdihal was physically present at the event, while Finance Professor Floyd Haynes tuned in virtually.
The post-2017 sum is believed to be over US$9 billion, inclusive of sanctioning expenses for the Liza Phase One and Two projects. When the PPP/C Government assumed office in 2020, it took over the shepherding of audits for ExxonMobil’s pre-contract and other pre-2017 costs.
The pre-contract cost audit was conducted by the UK firm, IHS Markit, which was hired by the previous Administration four years after oil was first discovered offshore. 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 Government has received much criticism for agreeing to these costs without an audit being done. The audit of cost oil claims is critical to ensuring that Guyana does not lose out on millions in oil revenues.