Latest update April 23rd, 2024 12:59 AM
Jun 07, 2022 News
– T&T stakeholders urge
Kaieteur News – The failure to have the right legal controls in place to get the best out of oil and gas audits has cost the people of Trinidad and Tobago millions of US dollars over the years. Some of these mistakes, they are still paying for today.
In light of this, industry stakeholders of the CARICOM State stressed the need for Guyana to be vigilant when auditing oil companies’ bills and implement mechanisms that would guard against abuse. On the sidelines of the recently concluded Trinidad and Tobago Energy Conference 2022, stakeholders sought to impress upon this news agency, that petroleum cost auditing is a technical function requiring specialised knowledge and expertise.
They explained that multinational oil and gas companies have the resources to employ ample financial advisers, accountants, and lawyers. Meanwhile, most developing-country tax authorities suffer from weak capacity owing to a shortage of skilled staff. In many cases, it was explained that those agencies have yet to develop sector-specific knowledge to detect and mitigate cost overstatement; even as they work to simultaneously keep up with an industry that is constantly changing. In essence, the capacity imbalance between oil companies and governments makes it profoundly difficult for revenue administrators to control costs.
One way of bridging the gap, they said, is for the two year-old producer to review and strengthen laws that determine the treatment or eligibility of costs to be recovered by oil companies. With such a tool, they argued that auditors would be armed with a key legal tool to protect government revenues from abuse. “Of course this is a matter of policy, but it is vital that Guyana gets this right. This loophole has cost us over US$200M in taxes and we are not even producing at the scale Guyana is; even the incentives we give out have opened a door to massive abuse that we cannot close to this day. Guyana has to do this right or it can lose way more than we did,” one stakeholder shared.
It was in May the Government of Guyana had signed a contract for a four-month review or audit of ExxonMobil’s expenses between the years 2018 to 2020.
Importantly, the audit will cost Guyanese some US$751,000. This is a discounted price from the US$1 million that was being sought by the consortium to undertake the review.
The consultancy was awarded to VHE Consulting, which is a registered partnership between Ramdihal & Haynes Inc; Eclisar Financial; and Vitality Accounting & Consultancy Inc. The Local Consortium is supported by International firms- SGS and Martindale Consultants for the ‘Cost Recovery Audit and Validation of the Government of Guyana’s Profit Oil Share’.
Government has come in for some considerable backlash for the short timeline it has given the companies to conduct the audit. It should be noted that the audit timeline is in stark contrast to Ghana and Kenya for example, where the authorities there retain the right to complete audits of companies’ cost recovery bills within seven years. In Peru, the time limit for audits is a minimum of four years. Even in the USA, audits are allowed to be completed within a minimum of three years.
International agencies such as Oxfam America have warned that even a three-year deadline would not be suitable for Guyana given its technical deficiencies. Natural Resources Minister, Vickram Bharrat has nonetheless expressed every confidence that the contracted consortium can get the job done. He said that the results of the said exercise would also be publicised while adding that any issues found would with overstated costs would be reclaimed.
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