Latest update May 18th, 2024 12:59 AM
May 05, 2024 ExxonMobil, News, Oil & Gas
Kaieteur News – The Government of Guyana (GoG) is sitting with its hands tied behind its backs and can take no action to prevent United States oil major, ExxonMobil Guyana Limited (EMGL) from awarding contracts to companies that were accused of corruption.
This was explained by Vice President, Bharrat Jagdeo on Thursday. He was asked by this publication whether he is concerned that the company could be granting projects to shady companies using Guyana’s oil revenues while the country has no say.
The question came on the heels of a report that the French-US firm Technip FMC recently secured a contract for subsea works in Guyana’s sixth oil project Whiptail, worth approximately $US1B, however, over the last few years, the company has faced multiple lawsuits and fines for corruption and bribery of government officials, in the United Stated and the United Kingdom.
Although Guyana’s oil is being used to procure the services of these companies, the country has no say in their awards; it can only verify whether it was overcharged after the contract has been granted.
Jagdeo pointed out that the provisions of the 2016 Production Sharing Agreement (PSA) allow the country to verify costs after they have been incurred by the operator of the Stabroek Block, through the audit process.
“That’s the purpose of the audit so when they query it, they send it to Exxon now, Exxon has to explain how this screw was procured at this cost when the benchmark price, they cost everywhere else is $3,” the Vice President noted.
According to him, the Guyana Revenue Authority (GRA) is utilising bench-marking software that compares the costs submitted by Exxon to average costs in the industry. If the costs claimed by Exxon are found to be exorbitant, it would be flagged and the company would have to explain procuring products and services beyond the industry standards. The next step would be for the oil company to return the inflated costs to the profit bank. However, if Exxon disagrees with the government, it is then resolved through the dispute mechanism provided in the PSA, through a sole expert or via arbitration.
It would be poignant to note that Guyana would have to pay for all legal charges related to resolving the dispute with the oil company.
Be that as it may, the People’s Progressive Party Civic (PPP/C), though it promised in its 2020 Elections’ Manifesto to better manage the oil contract, has failed to effect any changes to address these glaring administrative flaw in the deal, although these will not affect the profits of the contractor.
The Stabroek Block oil contract prevents the GoG from arbitrarily changing the fiscal provisions of the contract. In fact, if the economic benefits of Exxon and its Co-Venturers are affected by any decision of the government, the administration will be required to institute mechanisms to ensure the oil companies receive the same fiscal benefits as initially agreed to.
In the meantime, the government continues to refuse to exercise oversight in the award of large contracts since according to the VP, “As I said before, there is no co-management.” He told the reporter from Kaieteur News that he should press Exxon on why the company chooses to conduct business with such companies.
The Chief Policymaker for the sector was keen to note that if the foreign company meets the bench-mark prices, then there would be no objection by the administration however, “if they as a result of any incestuous link between let’s say ExxonMobil and a firm from abroad, if that incestuous link would cause prices to go up and be unfairly added to our cost bank, it’s a big cause for concern for us and that’s why the auditors have to guard against that technically.”
He went on to explain that the government has insisted that the company utilises the procurement process to source the service of local companies through the enactment of the Local Content Law which has taken away business from some of the foreign companies.
Public Servants salary can double overnight by just fencing the oil projects.
May 18, 2024
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