-Jagdeo affirms Guyana will not lose a cent

THE review of the IHS Markit Audit of the 1999 – 2017 Cost Oil Expenditure has been receiving the required attention at the technical level, and notwithstanding the pace of the audit’s review being somewhat slow, Guyana stands no risk of losing out financially because, ultimately, any unjustified expenses will be disallowed and returned to profit oil when the audit is complete.
This was explained by Vice President, Dr. Bharrat Jagdeo, during a press conference on Thursday last, where he acknowledged that the review of the draft audit has been somewhat protracted.
In February 2021, the IHS Markit submitted a “Draft Audit Report” on the operation expenses of Esso Exploration and Production Guyana Limited (EEPGL), a subsidiary of Exxon Mobil, operator of Guyana’s offshore Stabroek Block.

Since 2021, technical officials at the Guyana Revenue Authority (GRA) and the Ministry of Natural Resources (MNR) have been assessing the document given that any contention over claims made requires feedback from the operator, in keeping with standard financial practice.

The GRA has since explained that this step must be completed before IHS Markit can issue the final audit report. In 2020, IHS Markit submitted an intermediary report that was incorrectly labeled as the final report; however, the final report remains to be completed.

“The sloth in addressing the concerns is accurate. It’s going too slowly. But we are not going to lose. You can’t lose because…if Exxon can’t give proper explanations, it [unjustified expenses] will be removed from the cost bank and go into the profit part of the sharing. It’s not money that you will lose, the country will recover it. That is the purpose of an audit,” Dr. Jagdeo explained.
Dr. Jagdeo related that the government has been urging for the completion of the report, even as they try to be understanding of the need for the technical team to be meticulous in their work.
“As policymakers, we press the technical people to get this along, complete the work. It’s going slowly, but it is getting the required attention at the technical level. What would have been even more distressing is if our group or the 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, even if it takes a bit longer and we’re not going to lose a cent from that,” Dr. Jagdeo said.

According to the 2016 Production Sharing Agreement (PSA) that Guyana has with ExxonMobil, the company can recoup up to 75 per cent of the revenue as cost oil, which is incurred production costs.

The remaining revenue is split 50/50 between the government and the contractor. Hence, the amount of revenue that goes to cost oil affects the amount of money that the country is able to gain from its patrimony.

As such, the expenses listed by the company are audited by the government to ensure all expenses are allowable, and are at fair market rates. If an expense is raised as questionable in the audit and the company cannot defend it, then it is removed from cost oil, and Guyana’s profit is increased. For the period 1999 to 2017, Exxon has claimed US$1.67B in expenses.
Over the past few weeks, a local media house has published a number of reports on the draft audit, which has spurred discussions over the timeline and other concerns of the contents of the document.

The Vice President reminded that the progress on completion of the report is dependent on the technical personnel working on it. As such, he maintained that the audit currently under review has not been kept a secret, unlike the situation that played out with the 2016 PSA during the APNU+AFC’s time in government.

“The characterisation that the government has kept this a secret is patently false because I had to point out that this is not a policy making issue. This was available to over 20 technical people for two years. It’s been in the public as far as I’m concerned; there was no gag order not to speak about it, not to release and no gag order about it,” the Vice President reminded.
He added, “The policy making issue was to get the audit completed. This is a purely technical matter and I believe on one hand, they say the policymakers’ micromanage and then, the other hand, you must get down to deal with all the technical issues.”

However, even as work continues to complete the audit, the government has been reinforcing the country’s capabilities in the oil and gas sector in several other areas.
Moreover, since coming into government in August, 2020, the People’s Progressive Party Civic (PPP/C) government has also been spearheading massive public sector investments, and development that has rapidly transforming the country.

Taking this into account, Dr. Jagdeo noted that the government will not allow cynics of the country’s development to sidetrack focus.

“The sloth in the audit is a concern, not just of the media; it’s a concern of policymakers too. But we can’t divorce ourselves from the major advances this country has made and from the progress that has been engendered by the PPP returning to office.”

“We are not going to allow anyone to disparage the large amount of work that the PPP has done on policymaking to get this industry up to international standards and to put in place a proper framework by sniping at little things.”