By Kiana Wilburg
If oil companies rack up costs which are exorbitant and unjustifiable, Guyana will not be paying for it. This assertion was made, yesterday, by Petroleum Advisor to the Government, Matthew Wilks.
During a press conference which was held at the Ministry of the Presidency, yesterday, Wilks said that the power of the government is in cost recovery audits. He said that this is the case whether it is for the controversial US$900M pre-contract costs and any costs going forward.
The Petroleum Advisor said that he noted concerns in the media regarding certain costs being incurred by operators.
Wilks said, “Let me just put it very bluntly, if anyone tries to charge costs which are unwarranted or not benchmarked to norms, or are excessive, the Department will reject them. That is the purpose of cost recovery audits. It is not merely to sign off on costs. It is to say no under the right circumstances. So ‘no’ will be said when we look at costs.”
The Petroleum Advisor continued, “That is the whole purpose of getting qualified companies who have experience in auditing, who have benchmarking capabilities. It is such that they can look at the costs and they can benchmark them. They can tell the government if the cost is excessive or in the right order.”
He added, “If anything is excessive and there is no good reason for it being done, it will be disallowed and that is a risk to any operator. If an operator spends too much or gold plates or doesn’t seek cost efficiency, it might be spending its own money and not the government’s because we will disallow it, pure and simple!”
GUYANA CAN DICTATE
There has been mounting concern over the exorbitant airfare bill ExxonMobil could be racking up with American Airlines; a bill which the nation will have to pay the oil giant claims it in cost recovery.
But several oil and gas consultants are saying that Guyana’s authorities can put an end to this practice. They posit that the government can stipulate what airfare expenses the oil operator is to incur or even outright refuse to pay what is not deemed to be reasonable.
Last week, Oil Consultant, Dr. Jan Mangal had explained during an interview with Kaieteur News that in cost recovery, the oil operator can claim for money it spent on a number of things, one of which includes airfares. He contended, however, that the country can regulate anything that has to do with cost recovery.
Dr. Mangal said, “Guyana can dictate anything with cost recovery because the objective is to ensure that costs being claimed are reasonable. The country can refuse to pay for costs it deems are unreasonable.”
The consultant then pointed out instances where countries refused to pay costs claimed by oil companies.
He also stated, “We can recall some ministers saying Exxon should not be audited and Exxon would never inflate costs. And myself and Christopher Ram saying the opposite, and calling for audits. But the issue with these airfares is the tip of the iceberg; Exxon is probably defrauding Guyana of US$100’s of millions via cost recovery, in addition to the billions being taken with the unfair contract.”
Dr. Mangal who worked as a Petroleum Advisor to the coalition Government also made comments on the matter via his Facebook Page. Responding to a question sent to him, he said that there is no need for Guyana to do away with Production Sharing Agreements (PSAs) to bring an end to cost recovery woes.
He said, “Many countries have PSAs. The problem is the government’s refusal to manage the contract. The problem is the government’s refusal to lift a finger to protect Guyana’s interests under the contract.
“We need large teams of highly qualified and ethical oil and gas professionals, but the government has ensured we have none, as this benefits Exxon.
“With regard to the cost recovery of flights, other countries are able to handle this. Some countries restrict which oil company personnel can travel on which flights and in what class. But Guyana just wants to sit back and let Exxon take everything. And the PPP would be no better.”
Kaieteur News also spoke with several industry stakeholders at the recently concluded energy conference in Trinidad and Tobago. They included Chairman of TT’s Energy Chamber, Eugene Tiah; Renewable Energy Consultant, Siana Teelucksingh; and International Energy Consultant, David Small.
The consultants shared the view that cost recovery is an area that needs strict management by governments to ensure overpriced items are not allowed to further chip away at the government’s take from the oil project.
Energy Consultant, David Small said that in Trinidad and Tobago, the oil operators are required to submit statements and these are reviewed for reasonableness every three months. He said that if abnormalities are found, the authorities ask for more information, and if it cannot be justified then the operator will not be able to recover that sum from the country.
Just last week, Opposition Leader, Bharrat Jagdeo, acknowledged the fact that Guyana has a right to scrutinize all costs being recovered by oil companies. He went as far as to say that under a People’s Progressive Party (PPP) government, “every cent” that will be charged by the operator must be for services that were competitively procured.
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