Esso Exploration and Production Limited (EEPGL), the local subsidiary of ExxonMobil Corporation which operates the Stabroek Block in Guyana, has been flagged for unsound financial practices. This was specifically outlined in a preliminary audit report released by Leader of the Alliance For Change (AFC), Khemraj Ramjattan on Tuesday.
The report was produced by British firm IHS Markit, and examines EEPGL’s US$1.6B bills for the period 1999 to 2017.
The report highlighted that the government has reasonable grounds to challenge US$214.4 million.
It was highlighted that nearly 50% of the intercompany charges being included in EEPGL’s 2017 Cost Recovery Statement have limited transparency, as such, fall short of the expected level of accounting documentation that ought to be provided to the Guyana Government.
Even after several requests were made for further clarification of these costs, IHS said EEPGL has not been able to demonstrate adequate justification for these charges.
The audit report, which remains under scrutiny by the Guyana Revenue Authority and the Natural Resources Ministry, also identified a total of US$31.43 million that had been added to EEPGL’s 2017 cost recovery statement without being recorded in the company’s main accounting records. It stated that while the payments were made by the co-venture partners, Hess Corporation and CNOOC Petroleum Guyana Limited, about 90 percent of that sum was incurred before the partners signed the Stabroek Block Production Sharing Agreement (PSA). The auditors were keen to note that the validity of those costs for inclusion in the cost bank was not demonstrated by EEPGL and therefore should be excluded.
Furthermore, the audit team found that EEPGL had not adequately kept the Government of Guyana informed of the activities and costs associated with the development, claiming that “the annual Work Program and Budget submission did not meet expectations, and justifications were not provided to explain and justify scope changes or cost overruns at the end of each year, as required in the PSA.”
The audit team even discovered that EEPGL failed to provide insurance certificates to ensure that full coverage had been maintained throughout the audit period. Even though each partner is responsible for procuring coverage for its share of the block, only EEPGL provided premium details and invoices and the company was unable to confirm whether Hess and CNOOC were meeting their responsibilities in this regard.
The results of the audit report have raised significant concerns regarding EEPGL’s transparency, accountability, and adherence to the PSA. The opposition has been urging the current government to take immediate action to hold EEPGL accountable for its actions and safeguard the country’s resources.
In response to claims by the opposition that his government is withholding the audit report from public scrutiny, Vice President Dr. Bharrat Jagdeo denied the allegations. He said government is taking necessary precautions to ensure that the contracted auditor leaves no stone unturned in their investigation.
It is safe to assume that the opposition was not satisfied with that justification as Ramjattan released the report yesterday, claiming that the government has been “hiding it for two years now”.
