With two audits already completed for oil giant ExxonMobil’s oil and gas exploration activities in the Stabroek Block, the Natural Resources Ministry has indicated that the contract for the third audit will soon be awarded.
On Monday, the ministry explained that the procurement process for this contract has already started. They also made reference to the government’s efforts to upskill local Guyanese and equip them with the experience of auditing the sector.
“Two audits were completed for the period 1999 to 2017 and 2018 to 2020. As a manifestation of the government’s objective of upskilling Guyanese for the petroleum sector, a local firm was hired for the 2018-2020 audit. The procurement process for an audit of more costs has started and the award of a contract is imminent,” the Ministry said.
The People’s Progressive Party/Civic (PPP/C) Government has been optimistic of concluding, by this year-end, the three cost oil audits spanning the years 1999 to 2023, bringing all audits of ExxonMobil’s cost oil expenses to a current status. The audits in question are 1999-2017, 2018-2020 and 2021 to 2023. A final report from the first audit has already been released to the public, while a preliminary report for the second one was also released.
In 2019, British firm IHS Markit conducted an audit of ExxonMobil’s cost oil expenses racked up between 1999 and 2017 from its operations in Guyana and flagged US$214.4 million as questionable costs.
Following months of its own review, the Guyana Revenue Authority (GRA) – the technical body tasked with advising the Government on the audited oil expenses – supported the US$214.4 million disputed sum. The government has since indicated its intention to go to arbitration over this sum.
The audit of cost oil claims is critical to ensuring that Guyana does not lose out on millions in oil revenues. ExxonMobil’s pre-contract costs were inherited by the current Government when it entered office in 2020. US$460 million in pre-contract costs were already written into the 2016 Production Sharing Agreement (PSA).
Gas Monetisation
Mention was also made of the Gas Monetisation Strategy, which according to MNR is currently being finalised. Back in October, Government had released the draft National Gas Monetisation Strategy to the public for their feedback. The aim was to simultaneously work on finalising the strategy while getting comments from the public, thus saving time.
Government has already made it clear that its goal is to find the best option forward to monetise its gas resources. The Government has already said that a large number of comments were received on the strategy. In December, the government had indicated that all these comments would be included, and a total review of the strategy done.
Oil spill legislation
Meanwhile, the Ministry also indicated that a landmark oil spill legislation is in the pipeline. During a recent press conference, Vice President Bharrat Jagdeo had said that this piece of legislation may even be brought before the National Assembly goes into recess.
In addition to legislative protection, Guyana already has guarantees from oil producer ExxonMobil, in the unlikely event of an oil spill. Last year following a court ruling, Exxon affiliate Esso Exploration and Production Guyana Limited (EEPGL) had lodged a US$2 billion affiliate insurance guarantee with the Environmental Protection Agency (EPA).
Last year, ExxonMobil Guyana President Alistair Routledge had made it clear that Exxon had set up a “long line of defenses” to prevent oil spills from occurring. These include applying new technologies to the design of the wells, training personnel, and strict safety practices.
Additionally, the company also acquired a capping stack – a piece of equipment that is placed over the blown-out well to stop oil from spilling. These can be accessed within five days but as of this year, Exxon is required to have this equipment in the country as part of the Yellowtail Permit. Meanwhile, in the event of an oil spill, it was explained that Exxon already has about $20 billion in financial resources set aside to respond to such a “highly unlikely” incident.
