Jul 27, 2021 News
Kaieteur News – Due to the accounting provisions in the 2016 Stabroek Block agreement, Guyana only has a two-year window to audit all costs expended by ExxonMobil and its partners, Hess Corporation and CNOOC Petroleum Guyana, in a fiscal year. If that timeframe runs out, the country has to accept as correct, all costs incurred for the said year.
Since Guyana failed to audit in a timely manner, the costs ExxonMobil and its partners incurred for the Liza Phase One and Two projects, the oil companies can fully recover over US$3.5B and US$6B respectively. It will also be able to recover without any challenges, US$460M, which it claimed, were expended prior to the signing of the 2016 PSA.
The only costs Guyana stands a chance of auditing and refuting if unreasonable charges are found are those occurring from 2019 onwards. It therefore means that the PPP/C Administration still has ample opportunity to review costs expended for ExxonMobil’s Payara Development Project in the Stabroek Block. This project is expected to cost US$9B.
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. It has made this perspective known since 2015 alongside the International Monetary Fund (IMF).
Oxfam America, a confederation of 20 charitable organisations which seek to fight poor governance of extractive wealth, has said 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 time limit for audits is a minimum of four years. Even in the USA, the transparency body highlighted that audits are allowed to be completed within a minimum of three years.
Oxfam warned however 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 organisation 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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