Minister restricted to one audit per year

Under the Production Sharing Agreement (PSA) that ExxonMobil signed with the Government, Minister of Natural Resources, Raphael Trotman, has the right to audit the company’s books. However, that right was granted along with some very restricting measures. These measures are outlined in Article 23 and Annex C of the contract. Article 23 is limited and defers to annex C of the contract. Annex C goes more in detail of the accounting and auditing measures.

Annex C has an “Audit and Inspection Rights of Government” clause.

That clause states that the Minister “shall have the right to audit upon ninety (90) days written notice, at his sole cost and expense, accounts and records of the Contractor, maintained hereunder with respect to each Calendar Year within two years from the end of each such year.”`

The contract states that the Minister may audit, examine and verify, “at reasonable times during normal business hours but not more than once per Calendar Year, all charges and credits relating to the Contractor’s activities under the Agreement and all books of accounts, accounting entries, material records and inventories, vouchers, payrolls, invoices and any other documents., correspondence and records necessary to audit and verify the charges and credits.”

During the annual audit, the Minister has the option to review items previously subjected to audit in earlier years.

However, the contract stipulated that the review shall only be carried out in conjunction with the annual audit for any given year. This can happen “no sooner than twelve (12) months following the previous audit thereof; and only be for the purposes of verifying a matter arising in a later period, which relates to the earlier year(s) in question or as specified in Section 1.5 (b).” The PSA also states that at the conclusion of each audit, ExxonMobil and the Government shall endeavour to settle outstanding matters and a written report will be issued to the Contractor within 60 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 (60) days following receipt of the report indicating acceptance or rejection of the audit claim and in the case of a rejection showing explanations thereof.”

It was further stipulated that should the Minister consider that reply requires further investigation on any item therein, the “Minister shall have the right to conduct further investigation in relation to such matter within sixty (60) days of its receipt of Contractor’s reply.” If within 60 days of the Minister’s further investigation, the Parties are unable to agree to the disposition of the Minister’s audit claim, there shall be arbitration in accordance with the arbitration provisions of the contract.

“All adjustments resulting from an audit agreed to by the Contractor and the Minister conducting the audit shall be reflected promptly in the accounts by the Contractor and any consequential adjustments in Crude Oil entitlements shall also be made promptly.”

(Kaieteur News)