GRA demands release of final audit report on Exxon’s US$7.3B expenses

Nov 11, 2024 News

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Kaieteur News– Local consortium VHE Consulting has been instructed to release the finalised second audit of ExxonMobil’s US$7.3 billion Stabroek Block expense for the period 2018 to 2020. This is according to Commissioner General of the Guyana Revenue Authority (GRA), Godfrey Statia. 

He told this publication on Saturday, “The final audit will be released within the week. I have already given the go ahead to VHE for them to do so.”

The second audit was conducted by VHE Consulting, a registered partnership comprising Ramdihal & Haynes Inc., Eclisar Financial, and Vitality Accounting & Consultancy Inc., with international support from SGS and Martindale Consultants. The contract for this audit was valued at US$751,000 (GY$156 million).

An analysis of the second audit report reveals missing details on key expenditures that were covered in the first oil audit that was done by British firm IHS Markit of the company’s 1999-2017 expenses. IHS had recommended that the Government of Guyana (GoG) disallow US$214 million in costs being claimed by Exxon for the misuse of Guyana’s oil profits and failure to justify expenses.

The first report, commissioned by the Coalition government, provided comprehensive data on significant costs, such as those for supply vessels, drill rigs, SURF, helicopter services, and waste management, while these details are notably absent from the audit report by the local consortium. Currently, citizens can access VHE’s “Initial Audit Report for the Stabroek Block Cost Recovery Audit – 2018 to 2020” on the Ministry of Natural Resources website. That version was published on April 12, 2024 and is 135 pages.

Notably, VHE was recently awarded a $312 million contract for the third oil audit of Exxon’s Stabroek Block expenses for the period 2021 to 2023.

Findings published in the initial report

VHE identified that there was some US$65.1 million which were listed as exceptions. This included “Improper Charges for Ogle Office Complex Studies and Construction Costs” which totaled US$18.9 million, ‘Enterprise Development Center’ at US$3.5M  and a number of others.

It is important to note that costs recovered by Exxon have to be directly related to oil production in the Stabroek Block offshore Guyana. In October 2023, this publication reported that ExxonMobil had used Guyana’s oil profits on Christmas cookouts, zumba and yoga classes.

It was revealed that the oil company used US $136,003.62 to cover costs attached to sponsorships, fitness classes, promotional items and other similar activities, which auditors said were in no uncertain recoverable. The Stabroek Block Production Sharing Agreement was also referenced by them and it said that only those costs associated with expenses and expenditures relating to the petroleum operations can be recovered from the Stabroek Block account.

For further clarity, the auditors noted that in order for a cost to be recoverable, it had to be in connection with production operations. Hence, the removal of US $136,003.62 from the Stabroek Block account to cover Yoga and Zumba fitness classes for its expatriates, a Christmas potluck luncheon, the hosting visit for a Shell Beach Outreach Programme including catering and boat and ground transportation; Exxon branded duffel bags, coolers, and lanyards for a Contractor Safety Workshop; Meals, beverages, tents, chairs, and facilities for “Culture of Health” 5K run/walk and other similar events leave it in breach of the contract.

Another instance highlighted in the second audit was the misuse of funds to pay for drill ships to be on standby for Kaieteur and Canje blocks. Going a little more into detail, the auditing team noted that Exxon had four drill ships from Noble Corporation in early 2020 working. After suspending the services of Stena Carron and Noble Tom Madden and move them closer to shore into a “hot standby” (idle but still operational) mode due to staffing issues, records show that Exxon had Stena on standby to execute works for Stabroek as well as Canje and Kaieteur which it walked away from in 2023.

Records also show that Exxon had the Stena Carron drill ship drill the Tanager-1 well in the Kaieteur Block beginning September 9, 2020 and ending November 23, 2020. Stena was then moved to the adjacent Canje Block where it worked on the Bulletwood-1 well beginning December 31, 2020 and ending March 2, 2021. Stena was also used to drill the second well in Canje called Jabillo-1 beginning March 12, 2021 and ending March 20, 2021.

Furthermore, Exxon was caught by auditors spending Guyana’s oil profits to pay for the monitoring of newspapers and media between the period 2018 and 2020. A review of the company’s expenses during the period found that a total of US$2,465,061.62 was claimed by Exxon for its Public Affairs Program.

These costs, according to the auditors, are not related to petroleum operations and should therefore not be billed to the country’s oil. According to the audit report, Exxon used the sum stated above on media messaging; stakeholder relations, issues management; recording, editing, and voice talent for public service messages on Guyana’s Sovereign Wealth Fund; hosting visit for Shell Beach Outreach Program including catering and boat and ground transportation; Liza Destiny Arrival Commemoratory Event; branded drawstring sports packs and bottles; media monitoring services and newspapers as well as brochures for Exxon.

 

(GRA demands release of final audit report on Exxon’s US$7.3B expenses)

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• ExxonMobil, Godfrey Statia, GRA, Stabroek Block, VHE Consulting

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