The Guyana Government could possibly move to arbitration to recover the US$214.4 million cost oil claim that was flagged by auditors as questionable expenses incurred during the period 1999 to 2017 by United States oil giant, ExxonMobil.
In 2019, British firm IHS Markit had conducted an audit of ExxonMobil’s cost oil expenses racked up between 1999 and 2017 from its operations in Guyana and had 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 – has supported the US$214.4 million disputed sum.
Vice President Bharrat Jagdeo on Thursday said Government will not be sticking to the advice given by its two auditors – IHS Markit and GRA – and therefore, would not enter into any negotiations with Exxon to reduce this claim.
“I don’t believe there is scope at this stage for that especially given the magnitude of reduction that Exxon is talking about, moving from US$214 to US$3 million. So, if you’re saying that we’ll settle at US$3 million that would effectively leave Government with half of that or so. Those figures are not palatable at all so we would have to maybe go to arbitration on this matter,” Jagdeo told reporters at his press conference.
Based on the 2016 oil contract that was signed between ExxonMobil and the then A Partnership for National Unity/Alliance For Change (APNU/AFC) Government, Guyana will have to incur the cost of the oil company’s legal fees should the matter go to arbitration.
During Thursday’s press briefing, the Vice President was asked whether Government has looked at the numbers to ascertain what that arbitration bill could rack up to. The Vice President indicated that they have not done so.
He went on to explain that Government may have to consider bringing in a third party – outside of what is contemplated in the 2016 Production Sharing Agreement (PSA) and agreed to by all sides – to possibly take over the arbitration process on Guyana’s behalf.
“I think you need an independent third party to deal with this. If you settle on any figure with Exxon [even at] US$200 million, you’d have somebody saying ‘Oh, we give into Exxon’ and if we settle at US$3 million, it’s worse. And therefore, you need a third party that would deal with all of these issues… a third party that everyone has faith in – the whole country. Maybe that is a route that could be explored. But right now, I think we should not engage in negotiations [with Exxon to settle the claims],” VP Jagdeo maintained.
This US$214.4 million cost oil claim was recently embroiled in controversy after it was reported last month that Senior Petroleum Coordinator at the Natural Resources Ministry, Gopnauth “Bobby” Gossai, had reportedly engaged Exxon and reduced the flagged figure to US$11 million and then subsequently to US$3 million.
The Guyana Government has since come out saying that it will use GRA’s figure and declared that the tax body is the only technical agency in charge of the State’s auditing of the cost oil expenses.
The Ministry has since announced that a probe into the unauthorised negotiation will be done and necessary disciplinary measures will be taken.
On Thursday, Jagdeo was asked about Gossai’s fate but said that is a matter being dealt with by the Natural Resources Ministry.
Meanwhile, at a press conference on Tuesday, ExxonMobil Guyana Limited (EMGL) President Alistair Routledge had indicated that GRA reached out to them and there was a request for additional information on the cost oil claim.
Routledge indicated that the audit was still ongoing as they continued to seek a reduction of the flagged US$214.4 million.
However, GRA subsequently said on Wednesday that it is sticking to IHS Markit’s US$214.4 million, notwithstanding them reaching out to Exxon to seek clarity from the auditor on the findings.
Following its review of the audit on the cost oil claims, GRA had supported the US$214 million in cost oil claims that was flagged by the British auditing firm and on August 8, written to the Natural Resources Ministry indicating it’s no objection to this sum, effectively closing the matter.
GRA Commissioner General Godfrey Statia explained on Wednesday that GRA’s request for additional documents from the oil major should not be taken to mean the matter is being reopened.
“The Authority wishes to categorically re-iterate that it stands by its advice to the Ministry of Natural Resources and the Government of Guyana that the Cost Bank Adjustment of US$214.4M as reported in the “Audit Report Recommendation Final” by IHS Markit is the accepted final figure.”
“Further the Authority unequivocally states that its correspondence to IHS Markit seeking clarity to the said “Audit Report Recommendation Final” and copied to EMGL should in “no way or form” be construed as a change in the Authority’s position that the Cost Bank Adjustment of US$214.4M be adjusted, nor to re-open the process as intimated by the CEO of EMGL,” the GRA Commissioner further said.
If both sides are unable to reach an agreement on the final cost oil figure, the matter is then expected to go to arbitration.
During the press conference earlier this week, Routledge had expressed a preference for the figure to be settled on before it reaches the arbitration stage.
“It’s a technical process. It’s not a political or management process. It’s a technical process to ensure the right costs are put in the right place and are substantiated by the right documentation. And that’s what we’re pursuing… To ensure the right people who are authorised to review them and sign off on them. It would be a last resort, in my mind the process would have broken down, if we had to go to arbitration,” Routledge explained.
