The People’s Progressive Party/Civic (PPP/C) Government is gearing up to facilitate an audit into Exxon’s cost oil claims covering the period of 2017 and 2020. This process is important in ensuring that Guyana does not miss out on oil revenue.
This was revealed by Vice President Bharrat Jagdeo during a recent press conference. He explained that they already have terms of reference to procure a company to audit these cost oil claims. Additionally, the Government is working towards building capacity in the Guyana Revenue Authority (GRA).
“Apart from that, we have already prepared the terms of reference for the new contract to be issued, that will have to have local content in it, to do the audit between 2017 and 2020. And we’re working also at building the capability to do this audit within GRA, so it can be more real-time as in the same year the expenditure is made,” Jagdeo said.
Added to that, Jagdeo explained that the Government has had GRA and the Department of Energy look at the reports done by IHS Markit, the firm that previously audited Exxon’s pre-contract cost of US$460.2 million.
“They have since submitted their comments to the company that was hired. That company has to send us, in a matter of days, the draft report which they had said was the final report. And that report has to be sent to ExxonMobil and then based on their comments, a final report will be completed and will determine whether we accept the pre-contract expenditure as well as the additional expenditure up to 2017.”
“We will then determine whether all of those costs are consistent with the contract’s understanding of what should be deducted as cost oil. And then have the company, if there is an adverse finding and I gather there has been adverse finding, decide how we move forward,” Jagdeo also said.
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 hundred 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.”
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 – A Partnership for National Unity/Alliance For Change (APNU/AFC) – has received much criticism for agreeing to these costs without an audit being done.
The former Government finally contracted a company, British consultancy firm 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. At the time, former Energy Department Head, Dr Mark Bynoe had said that this was due primarily to flight restrictions.
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)”.