Audit report reveals... Exxon single sourced hundreds of US-millions in contracts

Audit report reveals… Exxon single sourced hundreds of US-millions in contracts

Apr 10, 2023 News

Kaieteur News – An audit conducted by IHS Markit, a British firm hired by the former administration, to specifically review the expenses of oil major, ExxonMobil between the period 1999 and 2017, to the tune of US$1.6 billion, found that hundreds of US-millions in contracts were single sourced by the company.

ExxonMobil Guyana Country Manager, Alistair Routledge

According to the document which has been shared with this newspaper, “Vendor spend over the audit period amounts to a total of $1,067 million, of this, procurement details for $953 million or 89% relate to contracts and invoicing.”

A revision of the contracts conducted by the audit team found that US$613.5 million or 64 percent of the value of those reviewed contracts were awarded on a competitive basis and are aligned with the provisions of the 2016 Production Sharing Agreement (PSA). However, 25 percent of the value- US$240 million were single sourced and 11 percent -US$99.5 million were partial single source contracts.

The audit report stated, “For the procurement and award of contracts conducted on a competitive basis, the procurement process provides adequate transparency to meet the PSA requirements.”

It noted, “Of the single source procurement awards, EEPGL has not demonstrated the competitiveness of the rates within the contract for contracts with a combined value of $28,476,876. This amount should be removed from the Cost Bank.”

The Audit firm was hired to review of all exploration and development costs submitted for recovery by Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), between 1999 to the end of 2017 in the Stabroek Block. The total expenditure that has been amounts to $1,677,774,727.

Following reports on the document by another section of the media, the Guyana Revenue Authority (GRA) issued a statement indicating that the said report is not final.

Be that as it may, the single sourcing of major contracts by ExxonMobil goes against the Stabroek Block contract; the agreement which the government maintains must be adhered to. In refusing to renegotiate the contract to secure better fiscal terms for the country, government said it must adhere to the ‘sanctity of contract’ principle.

In the meantime, its 50/50 partner has been flagged for single sourcing contracts worth US-millions.

Notably, Article 18 of the agreement requires Exxon to establish tender procedures in its conduct of petroleum operations, allowing Guyanese to participate where necessary.

Article 18.2 of the PSA states: “The Contractor shall establish appropriate tender procedures for the acquisition of goods, materials and services which shall ensure that Guyanese suppliers and Sub-Contractors are given adequate opportunity to compete for the supply of goods and services.”

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Audit, contracts, ExxonMobil, review, single source

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