ExxonMobil says US$214.4m in disputed oil expenses still being discussed
-months after GRA said figure is final
More than three months after the Guyana Revenue Authority (GRA) stated that the US$214.4 million in disputed ExxonMobil oil expenses, as identified by UK audit firm, IHS Markit, be accepted as the final figure, the oil company on Tuesday said that discussions were still being had on the way forward.
And while two audits are outstanding, Country Manager of ExxonMobil, Alistair Routledge, also announced that they have been told that a third, covering the period from 2020 to 2022 would be commencing soon.
The company’s position comes even as sources said that the US$214.4 million “figures won’t change” and that the company would have to make the necessary adjustments so that both Guyana and its Stabroek Block partners can collect their respective $107 million as the disputed figure has to be shared 50:50..
“The government has been very clear that the authority for this is the GRA. We are in discussions with the GRA on the next steps; what needs to be done. When we have something concrete to share, we will share with you. But we are in discussions about the two audits which started; they are still in process and we have been notified about the new audit for the period up to 2022,” Routledge said when asked for an update on the audits.
“The process hasn’t ended. The process includes having an auditor come in and do the audits, then they go through the findings, share findings and questions with the operator - we address those. If there are some things we agree [with] then we take that money out of the cost bank. If there are others then there are questions, then there is discussion until those are either resolved before you move to the next tranche of the agreement, to go to arbitration, or then ultimately go to an expert. So we haven’t kicked off those next steps. I think the GRA is looking at all the documents that have been provided by the ministry and we are talking to them about what is the next step to be taken,” he added.
In October of last year, government made it clear that the best solution should the company not want to pay would be arbitration, as it would not shift from the advice given by the GRA.
“This is the easiest way. And given also, the kind of populism… I think you need an independent third party to deal with this. If you settle on any figure with Exxon. If you settle at US$200 million, you would have somebody saying, we gave into Exxon. And if you settle at US$3 million, it is worse, and therefore you need a third party that would deal with all of these issues maybe a third party that would be agreed to,” Vice President Bharrat Jagdeo had said.
“The arbitration provides for a third party, maybe some other mechanism that provides for a third party not provided for right now, provided for by the PSA (Production Sharing Agreement), but a third party that everyone has faith in, the whole country. Maybe that is a route that could be explored but right now I think that we should not engage in negotiations,” he added.
Jagdeo’s statement had followed the discovery that ExxonMobil had been engaged in unauthorized talks with a senior employee of the Natural Resources Ministry to cut the disputed figure. After the revelation in Stabroek News those unauthorized talks were terminated.
GRA had in the same month reiterated its advice to the government that the US$214.4 million in disputed ExxonMobil oil expenses, as identified by UK audit firm, IHS Markit, be accepted as the final figure.
“The Guyana Revenue Authority (GRA) has noted the several statements in the press related to the above Cost Oil Audit, the most recent attributed to the CEO of Exxon Mobil Guyana Ltd (EMGL). The Authority wishes to categorically reiterate that it stands by its advice to the Ministry of Natural Resources and the Government of Guyana that the Cost Bank Adjustment of
US$214.4M as reported in the “Audit Report Recommendation Final” by IHS Markit is the accepted final figure,” the statement said.
“Further, the Authority unequivocally
states that its correspondence to IHS Markit seeking clarity to the said “Audit Report Recommendation Final” and copied to EMGL should in “no way or form” be construed as a change in the Authority’s position that the Cost Bank Adjustment of US$214.4M be adjusted, nor to re-open the process as intimated by the CEO of EMGL,” it added.
Annex ‘C’ of the PSA deals with audits and the processes triggered during and after. “At the conclusion of each audit, the parties shall endeavour to settle outstanding matters and a written report will be issued to the contractor within sixty days of the conclusion of such audit. The report shall include all claims arising from such audit. The contractor shall reply to the report in writing as soon as possible and in any event, not later than sixty days following receipt of the report indicating acceptance or rejection of the audit claim and in the case of a rejection showing explanations thereof,” the PSA states.
“Should the minister consider that the report or reply requires further investigation on any item therein, the minister shall have the right to conduct further investigations in such matter within sixty days of its receipt of contractor’s reply. If within sixty days of the minister’s further investigation the parties are unable to agree to the disposition of the minister’s audit claim, the claim shall be submitted to the sole expert in accordance with Article 26 of the agreement.”
According to the PSA, all adjustments resulting from an audit agreed to by the contractor and the minister conducting the audit shall be reflected promptly in the account by the contractor and any consequential adjustments in crude oil entitlements shall also be made promptly. “In the event that an audit claim by the minister is not settled to the minister’s satisfaction by the contractor’s reply as provided for… the contractor shall be entitled to recover any disputed accounts pending final resolution of the claim. However, any subsequent adjustments in the minister’s share of profit oil following resolution of the claim shall be repaid with interest, at the agreed interest rate as a first claim from the contractor’s share of future profit oil. In the event that the contractor’s share of profit oil is insufficient to provide for the minister’s extra entitlement including interest, the contractor shall promptly make an equivalent payment in United States dollars to the minister,” the PSA adds.