Kaieteur News – Guyana’s failure to conduct cost audits, into the post 2017 expenses of the oil companies, is a public scandal. When one considers the sums involved – running into billions of United States dollars – it is simply unacceptable that Guyana now has to simply accept the tab which was thrown its way by the oil companies.
As was reported by this newspaper in January of this year, Guyana had in excess of US$6 billion in oil related expenses to audit from petro-giant ExxonMobil and its Stabroek Block partners, affiliates and sub-contractors. And Jagdeo was fully aware of this fact.
He must explain as the Senior Minister responsible for the petroleum sector what actions he took in relation to expediting this most important auditing process. His excuses do not hold water.
An investigation is needed into Guyana not meeting the deadline for the audit of the post-2017 costs of oil exploration. Unless this is done, this failure will join the long list of debacles under the PPP/C administrations.
The people of Guyana should make it clear to Jagdeo that his lame excuse is not acceptable. He has to come better than he did in this week’s press conference.
Jagdeo had sought to excuse his government’s incompetence by claiming that the country did not have the capacity to complete the audits. However, the issue is not one of capacity since Guyana could have hired a competent foreign audit firm to undertake the audit until such time as the local capacity was developed.
Guyana does not have the capacity to do a number of things. But it has the capability to find those who can. We found a developer for the Amaila Falls Hydroelectric Project and they did all the preparatory work.
Guyana did not have the expertise to value the carbon in its forests. The Mc Kinsey Group did a study and produced a report which indicated that by protecting its forests, the country foregoes annual revenues of US$580 M per year.
Guyana did not have the expertise to design the new bridge across the Demerara River. It went out to tender for bids for the design of the bridge.
And last year, the said Vice President had indicated that a United Kingdom firm, IHS Markit, was currently handling the audit of costs leading up to 2017, which include pre-contract expenditures. So, it is not as if the Government was unaware that the capacity for auditing could have been outsourced.
A country is not expected to have all the capabilities it wants. Therefore, it farms out that which it cannot provide locally. Jagdeo’s pitiful excuse about lack of capacity therefore cannot be accepted. If there is no capacity, then hire that capacity to undertake the audits, until such time that locals can do the work. And if local content capability does not exist, then hire the foreign firm without the need for a local partner.
As it is now, the oil companies have gotten a free pass. And we are going to be saddled with billions of dollars in cost recovery for which we have not undertaken the necessary checks.
Last November, there were reports that the Guyana Revenue Authority (GRA) had undertaken the audit of the pre-contract costs, that is, the costs which Exxon and the other oil companies would have accumulated prior to the signing of the Production Sharing Agreement. And Jagdeo himself had once said that GRA would be building capacity to undertake the audits.
In February of this year, Jagdeo told reporters that the Government was moving to award a contract for the audit of ExxonMobil’s claimed recoverable expenses made after 2017. He went as far as stating that the terms of reference for a new contract to be issued, that there will have to have local content in it, to do the audit between 2017 and 2020.
Jagdeo had said last December that while the Department of Energy was auditing recoverable expenses sequentially, it could very well do so simultaneously. Yet, billions of US dollars in costs have been left unaudited and Guyana has to pay these unaudited expenses.
Last November, Jagdeo had indicated that there was as much as US$20B in costs to be audited. He had indicated that the post-contract costs constitute the bulk of these costs and that reviewing these costs was in the national interest. He now needs to answer whether a fair assessment of his government’s management of the audit process has jeopardised the national interest.
On this one, he cannot pass the buck. It was he who was quoted as promising, “We will ensure that every cent, from the beginning, to Payara, all of it, has to be reviewed.”
Every cent has not been audited. Billions of US dollars in recoverable expenses have not been audited.
This matter cannot be swept under the carpet. Heads must roll for the failure of the Government to complete the audits of billions of dollars.
Jagdeo’s excuse is like a strainer: it is full of holes. And since he has been integrally involved in the management of the oil and gas sector, his own performance should now be subject to a confidence motion.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)
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