Pre-contract costs for Exxon operations overstated by at least US$92m – Ram

The US$460m pre-contract costs claim submitted to the Guyana Government by ExxonMobil’s subsidiary and its two partners do not add up and is overstated by at least US$92m, according to chartered accountant and business analyst, Christopher Ram.

In his oil and gas column in today’s Stabroek News, Ram analysed the financial statements which have been lodged by ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), CNOOC/Nexen and Hess and says they and the government must now justify the US$460m figure.  The analysis of the figure had been held up as Hess only recently filed its financials here.

The US$460m in pre-contract costs pertains to the period from 1999 leading up to December 31, 2015.

Ram’s computation of the three figures supplied by the companies shows that even allowing for all expenses and expenditure, the total falls well short of the US$460,237,918 claimed by them.  (The full column is available at:

He said that his computations show that the claim of US$460 million is overstated by approximately US$92 million.

“I say at least because not all expenditure is recoverable as pre-contract costs. For example, Esso had close to US$5 million in current assets, mainly in inventory, which will be expensed as they are placed into use and consumed. Only at that point should they be expensed as contract cost. Therefore the amount should not be included as pre-contract cost… 

“Unless Esso, Hess and CNOOC/Nexen can come up with answers and explanations to what appears to be a very significant difference between the amount claimed and what the financial statements at a gross level reveal, they will encourage suspicion of grave impropriety in overstating their claim. It is clearly in their joint and several interest that they provide full, complete and credible explanations supported by authentic documentation capable of withstanding a rigorous audit and that they agree voluntarily to submit themselves to such an audit. I will raise those questions next week after first holding our government accountable”, Ram asserted.  

He posed a series of questions to the government:

  1. Whose idea was it to place a major matter involving nearly one hundred billion Guyana Dollars in an Annex rather than in the body of the Agreement?
  2. Was Annex C which contained the figure available and read simultaneously with the Main Agreement by the President, Ministers Trotman and Greenidge and the rest of the Cabinet?
  3. Was the figure US$460,237,918 set out in the Annex supported by detailed statements by each of the three companies?
  4. Was any verification exercise done of the pre-contract expenses figures and information provided? If so, by whom?
  5. Was the Audit Office asked to verify the figure?
  6. Who checked to verify that the sum claimed was consistent with the rest of Annex C, in terms of categories, allowed and not allowed etc.?
  7. If there was no verification at that stage, why was provision not made for such verification at a later date?  

Ram  argued that the pre-contract cost ranks with the royalty, stability clause, no tax and secrecy as the more egregious  features of the 2016 Agreement and said it would be good if at least this one is put to rest to the satisfaction of Guyanese.

He warned: “On the other hand, the oil companies must know that they ignore these questions at the risk of their reputation. Guyanese are not gullible or without options”.  



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