– will be forced to accept US$10B costs – IMF
The International Monetary Fund (IMF) has warned Guyana since 2016, that one of the most critical challenges it faces is conducting effective cost audits, especially when it is taken into account that the Stabroek Block Production Sharing Agreement (PSA) with ExxonMobil only gives the nation a two-year window to contest unreasonable and/or inflated costs. With such a timeline, it would mean that the country has to act swiftly or else, those costs as reported by the oil giant would have to be accepted, the IMF cautioned.
The Liza Phase One Project which was approved in 2016 is said to cost US$3.7B while Liza Phase Two will be approximately US$6B, bringing the total close to US$10B.
In spite of the IMF’s advice to get the audits done as quickly as possible, Guyana is yet to audit a cent expended by ExxonMobil since 2016 for Liza Phase One or Two. To compound this situation is the fact that the PPP/C Administration is expected by month-end to grant approval for ExxonMobil to expend billions of dollars more on another project called Payara. That development is likely to cost another US$6B.
Given the nation’s capacity deficiencies, international transparency bodies have strongly contended that the two year deadline the government has accepted, along with the fact that it can only do one audit per year, is not sufficient. They have stressed that the timeline should be extended. Specifically making this point is Oxfam America.
The entity is a confederation of 20 independent charitable organizations, which seek to fight some of the factors that lead to poverty, one of them being the poor governance of extractive wealth.
Oxfam America noted that the expiration periods for audit rights are set out in petroleum contracts and tax laws. It stressed, however, that these deadlines differ from one country to the next. It noted that in Ghana and Kenya for example, the authorities there retain the right to complete audit companies within seven years. In Peru, the limit for audits is four years. Even in the USA, the transparency body highlighted that audits are allowed to be completed within three years.
Oxfam warned that even a three-year deadline is not advisable for developing countries such as Guyana given the limited financial and human resources that are likely to delay the audit process.
Further to this, the organization said that it is equally important to keep an eye on record-keeping provisions in the petroleum contracts and tax laws.
It said, “Oil companies should be required to keep all their records in-country for easy access by the auditors during the audit period. But once that period expires, it becomes very costly to access records and therefore practically impossible to audit them…”
Oxfam warned that Guyana needs to take the auditing timeline for these costs as a matter of grave concern as it could cost the nation billions more.
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