Latest update April 19th, 2024 12:59 AM
Nov 09, 2021 News
Kaieteur News – Had the PPP/C Government conducted a rigourous audit of ExxonMobil’s US$9.5B Stabroek Block bill, Opposition Member, Roysdale Forde believes that at the very least, the country could have secured enough savings to cover citizens’ personal income taxes at the 2020 level for nearly 56 years.
By his calculations, Guyana could have recouped approximately US$1.1B (GYD235.2B) from the audit of the oil giant’s expenses in the prolific oil concession.
With the foregoing in mind, Forde asserted that the citizenry has a clear picture of the magnitude of the government’s failure to audit Exxon’s costs within the two-year limit prescribed in the Stabroek Block Production Sharing Agreement (PSA).
Expounding further, the lawyer said he is of the firm conviction that the potential savings from the audits could have prevented Guyana from having to beg nations such as China for loans to fund critical infrastructure and energy related projects. He noted as well that the millions of dollars in savings could have been directed towards building a first class highway from Georgetown to Lethem without having to borrow money from China; higher pay for nurses, teachers, and the disciplined services; the building of the Upper Mazaruni Hydro, which would yield eight times more electricity than Amaila; a greater opportunity to build industrial and agricultural base; cheaper internet access; better healthcare and education facilities; and substantial social and financial assistance to citizens. In light of the potential loss, Forde opined that chances for a better quality of life for Guyanese continue to diminish.
In conclusion, Forde noted that the PPP/C Government has wasted a golden opportunity to demonstrate that it is capable of managing the oil sector in the interest of all. He has since called for an independent investigation “into this colossal act of incompetence” by the administration.
Due to the nation’s failure to conduct cost audits within the two-year deadline prescribed in the Stabroek Block Agreement, Guyana has no choice but to allow ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), to recover all stated costs for its Liza Phase One and Two Projects. Both initiatives total approximately US$9.5B.
In addition to being able to recover the costs for Liza Phase One and Two, Exxon will also be able to recover without any challenges, the US$460M, which the oil company claimed was expended prior to the signing of the 2016 Production Sharing Agreement (PSA) governing the Stabroek Block. It had said this money was spent on all the exploratory work that was needed for the massive 2015 Liza discovery.
During his latest press engagement last week, Vice President, Dr. Bharrat Jagdeo said the government is disappointed that it has not been able to push through with these critical audits. He said the absence of strong local groups to do the audits is what stymied the process.
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.
INSUFFICIENT TIME
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 on Exxon, is not sufficient. They have stressed that the timeline should be extended. Specifically making this point over the years 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 seeks 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 auditing 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, the organisation noted 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.
Please share this to every Guyanese including your house cats.
Apr 19, 2024
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