The Guyana Revenue Authority (GRA) is in the process of setting up a specialised unit at its office to audit oil and gas expenses, a testament to Guyana’s continued building of capacity to manage the oil sector.
During a recent press conference, Vice President Bharrat Jagdeo confirmed that the Guyana Revenue Authority’s (GRA) Commissioner General, Godfrey Statia, was given approval to set up an oil and gas unit.
In fact, the Vice President noted that the GRA is setting up this unit even now. Jagdeo therefore questioned the basis on which recent criticisms from the A Partnership for National Unity (APNU) Opposition are being made.
“I find the APNU’s statement very puzzling, that we’re not doing enough to build capacity for audits. Mr Statia has full authority to establish a unit in GRA. We said to him, go ahead and establish the authority to do audits from the GRA perspective. I know they’re building the unit, they’ve been doing a lot of training of staff, things like that. So that’s a capability within the GRA.”
According to Jagdeo, ensuring full disclosure on cost oil expenses is an important focus on the Government. He pointed out that cost is an important factor in determining how much profit oil Guyana gets and noted that the model Production Sharing Agreement (PSA) tackles this issue.
“We have to strengthen our capability to have more detailed information about projects and their cost. And then have any deviation from that only done with the explicit approval of the Government of Guyana.”
“So clearly that was a deficiency and the new PSA fixes that, the one we’re passing that. Because we recognise that. So clearly that is a very important issue in the future. And it’s all about getting more control and having a bigger say in costs, without the day-to-day management,” he said.
Jagdeo also spoke about the arrangements the PPP Government made to ensure locals would be able to build capacity to do cost oil audits. This is the opposite of what the former APNU/AFC Government did, hiring British firm IHS Markit to carry out the first set of cost oil audits.
“We could have gone and done what was done at the beginning, where APNU hired IHS Markit to do the first audit. It was a foreign company. We could have gone that route and done the audit from 2017 to 2020, using only a foreign company. We said no no no, we work at trying to pull together a consortium of local companies, Guyanese who live abroad and others.”
“And we said you have to come in partnership with a foreign company, with capabilities. As a result of this, because of our specific dedicated effort to involve Guyanese, we had the last audit completed with heavy Guyanese involvement,” Jagdeo further said.
Last month, it was revealed that preliminary work had been completed on the second Esso Exploration and Production Guyana Limited (EEPGL) cost oil audit of expenses totalling US$9 billion, which was being undertaken by a consortium of local companies.
The US$751,000 cost recovery contract for the second audit, which covers profit oil from the years 2018, 2019, and 2020, was signed in a room full of stakeholders and suppliers last year May, during a workshop on local content.
The local auditors include Ramdihal and Haynes Chartered Accounting, as well as Vitality Accounting, who was present at the signing. Chateram Ramdihal was physically present at the event, while Finance Professor Floyd Haynes tuned in virtually.
The post-2017 sum is believed to be over US$9 billion, inclusive of sanctioning expenses for the Liza Phase One and Two projects. When the PPP/C Government assumed office in 2020, it took over the shepherding of audits for ExxonMobil’s pre-contract and other pre-2017 costs.
The pre-contract cost audit was conducted by the UK firm, IHS Markit, which was hired by the previous Administration four years after oil was first discovered offshore. There is an additional sum of approximately US$400 million from 2016 to 2017, which it is believed will also come under the rubric of cost oil.
The former Government has received much criticism for agreeing to these costs without an audit being done. The audit of cost oil claims is critical to ensuring that Guyana does not lose out on millions in oil revenues.
