Guyana agrees to allow Exxon and partners to use oil to pay for their vacations

Mar 16, 2023 News

Kaieteur News – The Production Sharing Agreement (PSA) governing the oil-rich Stabroek Block is not deemed a sweetheart deal for ExxonMobil and its partners by accident. The contract gives the oil companies the power to use a significant portion of the nation’s oil to cover a number of its bills, including those pertaining to the vacation and holiday expenses for its employees.

When dealing with Production Sharing Agreements (PSAs), the foregoing is considered an established industry practice. In some cases, regulators must give their permission for certain costs that can be recovered by the company. Those eligible costs are determined by the state.

In other cases, an agreement can specify a number of costs that can be cleared without permission, and there is a plethora of such expenses in the 2016 Stabroek Block Production Sharing Agreement. ExxonMobil and its partners can for example, recover the gross salaries and wages including bonuses of its employees. Costs regarding holiday, vacation, sickness and disability payments are also fair game.

Additionally, Exxon and partners can recover the cost of established plans for employees’ life insurance, hospitalisation, pensions, and other benefits of a similar nature customarily granted to the employees of the Parties comprising the Contractor.

Further to this, oil companies can recover reasonable travel and personal expenses of such employees including those made for travel and relocation of the Expatriate Employees assigned to Guyana. Kaieteur News has also observed that any personal income taxes owing to Guyana by employees of the Parties and paid or reimbursed by Exxon and its partners is cost recoverable.

While the oil companies do have the power to recover several costs without permission, the government’s only safeguard against abuse is the execution of timely audits. The 2016 PSA only allows Guyana to do audits within a two-year timeline.

There are currently two ongoing audits—one for historical expenses incurred from 1999 to 2016 totalling US$900M and another for US$7.3B incurred from 2018 to 2020.

The former was done by IHS Markit while the latter was done by a group of local consultants, Ramdihal and Haynes Chartered Accounting and Professional Services Firm, Vitality Accounting and Consultancy Inc., and Eclisar Financial & Professional Services. They were hired last year to conduct the audit alongside the Oklahoma-based Martindale Consultants Inc. and the Swiss technical company, SGS. The value of the contract is US$751,000. The audit costs reviewed covered the US$3.7B Liza Phase One Project fully and part of the expenses plugged for the US$6B Liza Phase Two Project.

Vice President, Dr. Bharrat Jagdeo confirmed earlier this month that the government’s auditors have completed their assessment of ExxonMobil Guyana’s recovery of its US$7.3B investments. The official noted that the affiliate company has two months to respond to the government’s findings.

• employees, expenses, Production Sharing Agreement (PSA), Stabroek Block, vacations