The procurement process for a firm to audit the more than US$960 million ExxonMobil said it racked up in pre-contract costs here is nearly completed, Director of the Department of Energy Dr Mark Bynoe says.
“The procurement process has not been completed so I cannot comment on same. I would be happy to revert… with requisite responses once that is completed, which we expect to be very shortly,” said Bynoe last week, in a response to questions from Stabroek News.
Bynoe had last year said that this country lacks the capacity to audit pre-contract costs for oil recovery and had revealed that an international firm will be hired to aid both the Guyana Revenue Authority (GRA) and the State audit office, to discharge their obligations.
Bynoe believes that Guyana cannot yet undertake its own audits in that particular area due to lack of capacity and as such, made the move to procure international services to assist local agencies with the fostering and transfer of oil and gas content knowledge.
“While both the Guyana Revenue Authority and the Office of the Auditor General have some capacity to conduct the first cost recovery audit of ExxonMobil, they tend to have limited subject expertise. In this vein, therefore, the department is working to procure the services of a reputable international firm that can assist these entities in conducting said audits,” he had said in September last year.
Following calls for ExxonMobil’s US$460 million pre-contract charges to be audited, the GRA last year announced that it will not only audit the costs up to the end of 2015 but the 2016 and 2017 cost recovery charges that are believed to be over US$500 million.
Earlier this year, United Kingdom-headquartered Information Handling Services Markit submitted an expression of interest to undertake the auditing while working with the GRA.
There has been much debate about the ability of local agencies to undertake such audits. This has seen civil society activist and Chartered Accountant Christopher Ram issuing sharp criticisms of their lack of capacity and in the case of the GRA, its lack of legal authority.
At the same time, accounting experts, such as US-based Chartered Accountant and Professor Floyd Haynes, have underscored the technical nature of such audits and the need for a “multi-disciplinary” auditing team to be used.
“A cost recovery audit… is designed to determine the validity, accuracy and legitimacy of claimed costs, and should be undertaken by a multi-disciplinary team with varying expertise to include legal, finance and accounting, petroleum engineers and as well as others,” Haynes said last year.
“Pre-contract costs in the oil exploration business typically fall into two general
categories – Finding Costs—cost of geological and geophysical work, cost of licences, signature bonuses, cost of drilling and exploration—and Development Costs—cost of acquiring, constructing, installing production facilities and drilling development wells. Auditing of these costs is indeed a non-trivial matter. Establishing the veracity of some elements of these costs may be straightforward; however, establishing the same for other cost elements can be very complex and could require Subject Matter Experts in areas outside those that [are] required in a traditional financial audit,” he added.
The government of Guyana has assured that oversight of the oil and gas sector and ensuring that citizens reap the rewards from the revenue from it was a key objective.
Production of first oil here has been moved up to next month instead of in the first quarter of 2020 and Bynoe has assured that required measures will be in place. “We continue to be encouraged by the progress being made on all fronts and [I] am confident that necessary systems will be in place to cater for an earlier date than was previously projected,” he told this newspaper.
