2nd report from audit of US$9B Exxon cost oil expected by March

The content originally appeared on: News Americas Now

Black Immigrant Daily News

The content originally appeared on: INews Guyana
Flashback- The fuel hose leads from the Liza Destiny to the Cap Philippe for the transfer of Guyana’s first million barrels of crude

Since the contract to audit US$9 billion in ExxonMobil cost oil expenses was signed last year, it has been a learning process for the local consortium of companies, but a second report is expected from the group by March of this year.

This is according to Natural Resources Minister Vickram Bharrat, when he recently responded to questions on budget allocations for his Ministry.

He explained that the tab for this contract is being picked up, not by the Government of Guyana, but through a mechanism ingrained in the operator’s contract.

“For example, in the new production licence that we’re issuing now, we’ve actually included an auditing fee. So, the operator is paying an auditing fee to Guyana, for those new licences. And that money is being paid into the petroleum account at GGMC. For example, the audit being done now is the one involving the three local consortiums.”

“The three auditing companies partnering with international companies. They’re being paid through that mechanism. An initial report was submitted by the consortium and we’re awaiting the second report which should be submitted another two months from today,” the Minister said.

Bharrat further clarified that the audit was meant to be concluded within 120 working days, which would equate to mid-2023. As such, the Minister noted that the final report is due in March 2023.

“What has happened since then is that the consortium would have sent a number of their accountants and auditors to Oklahoma. I know they went to Oklahoma to do some training programme. They went to Houston too. The whole idea of having a local consortium participate in this audit is to build capacity.”

“So yes, there’s been a slight delay but it is at the expense of building capacity locally so we can have this very local consortium and even add more local companies to them. The door is not shut to that. So that they can do the future audits and we can reach the stage where we’re not auditing 2018 and 2019, but we can actually audit 2021 and 2022 and even half-yearly audits.”

According to the Minister, this is why capacity is important. While there are good auditors and accountants in Guyana, the question remains whether they can audit oil and gas expenses. And unless they build capacity and learn on the job, the answer remains no.

“They need to familiarise themselves with the expenses associated with the oil and gas sector. Because if we’re going to talk about a Christmas tree or a riser or drilling fluid, then they’re not quite familiar with that. So, it’s a learning process too, and building capacity. But the last report is due in March of 2023,” the Minister further said.

The US$751,000 cost recovery audit contract, 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 People’s Progressive Party/Civic (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.