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ExxonM’s US$460M pre-contract costs inflated by US$92M

ExxonM’s US$460M pre-contract costs inflated by US$92M

ExxonMobil, News, Oil & Gas

– “If that is not fraud, I would like someone to tell what is,”- Chartered Accountant, Chris Ram

Kaieteur News – Chartered Accountant, Christopher Ram highlighted in a recent letter published in the Stabroek News that ExxonMobil’s US$460M in pre-contract costs being charged against Guyana’s oil is actually inflated by US$92M.

Chartered Accountant and Attorney-at-Law, Christopher Ram

Chartered Accountant and Attorney-at-Law, Christopher Ram

Ram recalled that in Annex C of the Production Sharing Agreement (PSA) governing the Stabroek Block, ExxonMobil Guyana Limited which leads a consortium in the concession included a charge for US$460M in costs. It said these expenses were incurred from 1999 to the 2015. The agreement states that this cost must be covered by Guyana’s oil.

However, Ram said his own examination of the records for Exxon and its partners, Hess Corporation and CNOOC Petroleum Guyana Limited, show that they only expended at a maximum, US$368M. “If that is not fraud, I would like someone to tell what is a fraud!” the Chartered Accountant wrote.

Ram’s flagging of US$92M in alleged inflated expenses appear to be reflected in an audit carried out by IHS Markit, a British Consultancy Group. That company was hired back in 2019 by the David Granger administration to examine a larger set of costs. It audited the US$460M incurred as well as an additional US$1.2B in bills Exxon and its partners racked up from 2015 to 2017. In total, the auditors found US$214M in questionable spending.

The Guyana Revenue Authority which functions as the government’s advisor on audit findings perused the IHS Audit Report and gave its no-objection to the US$214M flagged. It subsequently advised the Ministry of Natural Resources, another party in overseeing the audit process, to bring the audit to finality. Instead of doing so, the ministry’s Petroleum Unit engaged Exxon in separate talks which reduced the US$214M figure to US$3M.

Questions raised by Kaieteur News about the confusion over what is to be the final disputed sum led Vice President, Dr. Bharrat Jagdeo to categorically state that government will stand by GRA’s decision. Dr. Jagdeo said the ministry should not have engaged Exxon in such talks and even revealed that President, Dr. Irfaan Ali has called for a probe to be launched into the unauthorized reduction.

Following a review of the report from the investigation, Dr. Jagdeo said the appropriate action would be taken by Cabinet. He also clarified that Exxon would not be called in during the probe since anything it has to say on the reduction of the disputed costs would not be relevant. The Vice President said he is interested in who within the ministry authorized the diversion from GRA’s advice and why.

Following the announcement of a probe, Exxon issued a statement outlining that it has acted in good faith with the audit process. Government has said that the audit report on Exxon’s US$1.7B expenses is in the process of being finalized and gave no objection to GRA releasing the report.