The Government’s rationale behind agreeing to the inclusion of the US$460 million pre-contract cost in the ExxonMobil contract without an audit is that this sum can be audited at any time.
This is according to Public Infrastructure Minister David Patterson. He was at the time answering questions on why Government did not audit the sum in the first place before agreeing to its inclusion in the contract. Patterson was also asked whether there was any intention to audit the sum.
“The answer is obviously yes! We’ve always said that all cost recovery will have to be audited. They’ve said US$460 million, we’ll interrogate it. They’ve stated the number, we’ll audit it,” Patterson explained.
David Patterson
“I don’t know what the frequency of the audit will be for the second phase; but whatever it is, we’ll audit every single cost they put in. You can audit post- or pre-, so obviously we can audit it anytime,” Patterson affirmed.
Previously, analysts have urged that the US$460 million quoted as pre-contract sums the Guyana Government has to pay to ExxonMobil should be thoroughly disaggregated and audited before a cent is paid to the oil giant.
Guyana will have to audit and verify cost oil claims Exxon will make on its revenue. Exxon is expected to use revenue from its production in order to recoup its capital investment. Whatever remains of this is the ‘profit oil’ Guyana will have to split with the oil company and its associates.
According to Annex C of the Production Sharing Agreement (PSA) Guyana signed with Exxon, pre-contract cost “shall include four hundred and sixty million, two hundred and thirty-seven thousand and nine hundred and eighteen United States Dollars (US$ 460,237,918) in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015.”
In a report done on the oil sector last year, the IMF had urged the Guyana Government to, as soon as possible, start auditing all exploration and development costs being racked up by ExxonMobil.
When he presented the 2018 budget last year, Finance Minister Winston Jordan had alluded to the impending establishment of an Oil and Gas Unit at the GRA. The IMF had said establishment of this unit should become a Government priority.
“It will be important for this unit to start verifying and undertaking audits of cost incurred during the exploration and development phase, which is getting underway now. It would be advantageous to establish close working relations between the GRA and the sector regulators, to ensure that the limited petroleum sector expertise in Government is applied most efficiently,” the IMF had stated in its report.
At a January press conference, GRA had announced that this very Oil and Gas Unit (O&G Unit) was up and running in preparation for ExxonMobil beginning commercial production of oil in 2020. GRA Commissioner-General Godfrey Statia had explained that the GRA had secured the services of trainers from the United Kingdom (UK) in addition to those from the International Monetary Fund (IMF).
But reports as recent as April 1, 2018 indicate that no audit was ever undertaken of this sum, or the financial statements the company had submitted.
