Following the recent detection of a false declaration on oil well equipment that was imported on behalf of ExxonMobil, the Guyana Revenue Authority (GRA) is now reviewing old invoices to ensure that there is no overstatement in those documents as well.
This was revealed by Vice President Dr Bharrat Jagdeo, who told reporters at a press conference on Thursday that the Guyana Government is paying serious attention to this matter.
GRA had flagged false declarations made by a Trinidadian logistics company that acted as the broker on oil well equipment imported for ExxonMobil. It was reported last week that the company, in submitting the declaration, had listed US$4.4 million worth of oil well equipment as a whopping US$12.1 billion.
This revelation has prompted Government to take certain steps to ensure this was a one-off incident. “We’re now ensuring that before we finalise any of the [cost oil] audits – the second audit, the GRA will go back and check all the back-invoices for the past several years, to see that there’s been no overstatement on any of these invoices. This is a serious matter, and we’re taking it seriously,” the Vice President noted.
The second oil audit that he is referring to covers the period 2018 to 2020. That process is currently ongoing. Last month, Jagdeo had noted that the United States oil company was written to respond to the findings of the audit. Guyanese firms Ramdihal and Haynes Chartered Accounting, and Professional Services Firm Vitality Accounting and Consultancy Inc., and Eclisar Financial & Professional Services had partnered with Oklahoma-based Martindale Consultants Inc. and the Swiss technical company SGS to conduct that audit.
Already, in the first cost oil audit, British firm IHS Markit had flagged US$214.4 million as questionable costs of ExxonMobil’s expenses incurred between 1999 and 2017 from its operations in Guyana. Government has since decided to move to arbitration to settle this disputed amount being claimed by the US oil major.
Meanwhile, the third cost oil auditor for the 2021 to 2023 period was tendered earlier this year, and that contract is now being finalised by the Guyana Government. Nevertheless, while reports had alluded to the controversy as a false declaration, Exxon has maintained that it was a typographical error that caused the worth of the equipment to be overstated in November 2023.
In response to a March 18, 2024 letter from GRA, asking it to show cause why proceedings should not be instituted against it, Exxon had committed to working along with GRA to address any further concerns on the matter. But during his weekly press conference on Thursday, VP Jagdeo confirmed that the GRA has since filed legal proceedings over the US$12.1 billion overstatement for the oil well equipment. He said the US oil major will have to explain this false declaration in the court.
“The effort by GRA to clarify this issue did not meet with helpful responses from Exxon…It is unbelievable that anyone could even think about submitting an invoice for US$12 billion – that’s like two FPSOs (floating, production, storage and offloading vessels) here. I don’t know how come they came up with that. They said it’s exchange rates. I don’t know what exchange rate they could’ve used etc. So, we’ll get the explanations in court, and we’re looking forward to get the explanations in court,” he stated.
Only earlier this week, President of ExxonMobil Guyana Limited (EMGL), Alistair Routledge, told reporters at a press conference that it has cleared up the discrepancies with GRA, cut ties with the broker that overstated the cost, and improved its internal systems.
“It was corrected for the customs, and they’ve received that. The GRA has the correct number. Everything was caught early, and there were no issues. Nobody suffered any loss. Everything was taken care of. And as I said, we’ve updated our procedures and the checks that are made to make sure this sort of error is not repeated.
“We are always committed to working ethically and correctly, and making sure all our submissions, be they for tax purposes or cost recovery, are accurate. We actually do what we call a business practices review every two years with all our employees…If there is something that there shouldn’t have been, then we will learn from that. We’ve already revisited the procedures around those submissions. As you may also be aware, the company that is supporting us for those customs duties has (been) changed, so we don’t anticipate that kind of issue happening again. But we’ll learn and make sure we put in place everything we can to not have errors,” Routledge said on Tuesday.
But while the EMGL President maintained that the overstated cost would not have affected the cost oil expenses, the Vice President argued that this does not matter.
“We made it clear that if invoices are deliberately increased, it would impact on two things. It would overstate the cost bank; and two, it will change the tax liabilities of the Government because, as you know, in accordance with the PSA (Production Sharing Agreement) that (former Natural Resources Minister under the A Partnership for National Unity and Alliance For Change Coalition Administration, Raphael) Trotman signed, the responsibility of paying taxes rests with the Government of Guyana on behalf of ExxonMobil. And so, we are treating this matter seriously,” Jagdeo contended.
In light of these discrepancies, the Vice President went on to emphasize the importance of using a benchmarking system when auditing accounts.
“That’s why your auditors have to ensure there is…a benchmarking software. So, I asked the GRA and they said they’re using benchmarking software. The audits have to look at comparable costs. So, if people buy a screw for US$10 and then they check the benchmarking software and the benchmarking software says a screw of that nature can only cost US$3, then they can query that in the audit. That’s the purpose of the audit,” Jagdeo posited.
