By Abena Rockcliffe-Campbell
There are several disparities highlighted in the way Esso Exploration and Petroleum Guyana Limited (EEPGL) handles its financials when compared to its partner, CNOOC/NEXEN.
For one, both subsidiaries have borrowed monies from their parent companies to fund their operations. However, in its financial statement, CNOOC was keen to point out that no interest is being charged on the sum.
CNOOC said, “The Branch owes the company, for advances to fund the Branch’s exploration activity. The amount due to the company is unsecured, non-interest bearing, and has no fixed terms of repayment.”
However, EEPGL, a subsidiary of ExxonMobil, failed to be that explicit. All that company said was that it received a loan. No mention was made of whether or not interest has to be paid. In any case, Guyana will have to stand the bill of any interest accumulated.
The disparities go further. The total debt of EEPGL in 2016 was $76.8B of which approximately $60B was incurred in 2016. This was pointed out by Christopher Ram in recent writings.
Ram noted that general and administrative costs for EEPGL were stated at $2.1B (This is $2.1B Guyana dollars and not US, as was inadvertently stated in yesterday’s article.)
Now, it is interesting to note that the $2.1B represents administrative costs only.
Expenses falling under administrative costs would include payments of accounting staff, rental of buildings, consulting expenses, corporate management (the salaries of EEPGL’s executives), legal payments, office supplies and utility payments. Administrative cost would not include anything directly related to exploration or drilling operations.
Ram was concerned about the fact that EEPGL gave no breakdown of how it spent over $2.1B on administrative costs.
He noted, “Except for legal and professional fees of $168M, there is no breakdown of this huge amount and one will have to speculate whether or not any interest cost is included in this amount.” Interest could account for why the amount is so high.
On the other hand, CNOOC incurred far less in administrative costs.
Ram noted that CNOOC only incurred $230M in general and administrative expenses and its overall cost is $52B.
Ram said, “This huge gap cannot be explained by the relative scale of the operations of the two companies. In other words, the two companies’ operations are not large enough to reflect the gaps in costs.
The Chartered Accountant said that having witnessed the “recklessness” with which the Government and Minister of Natural Resources, Raphael Trotman “blindly accepted” a whopping US$460 million as pre-contract costs, and, how tolerant they have been of the refusal of one of the Contractors to meet its statutory obligations with respect to the annual filing of returns and accounts, it would be wishful thinking to believe that the Government will get serious with the three contractors.
Ram noted that three years after the announcement of the discovery of petroleum, Trotman and the Government have not been able to take a single action in relation to the emerging sector, pass a single piece of legislation or call out a single oil company.
“In the process, they have shown themselves wholly lacking in managing a petroleum economy and the country’s relationship with the three oil companies. The Guyana Revenue Authority has its work cut out. The country is in for a rough ride.”
Hess Guyana Exploration Guyana Limited (Hess), which is the third partner operating the Stabroek Block, has not filed annual returns since its registration in 2014.
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