Dear Editor,
There were several reports in a certain section of the media highlighting a number of preliminarily cost oil audit findings for the period 2018-2020. Of interest, it was reported that the auditors had requested production data from ExxonMobil Guyana (EMG). According to the news report, the auditors were reportedly consistently told by EMG that the production data is not part of the scope of the audit, and that the data is with the Ministry of Natural Resources. The scope of the cost oil audit is governed by the provisions of the Petroleum Agreement (2016). Understandably, there is likely to be differences in interpretation by the various parties, in this case, by the auditors and EMG (the Contractor).
My interpretation, having examined the relevant provisions in the Petroleum Agreement, is that the production data is part of the scope of the audit and inspections, therefore the auditors were in order to request same from EMG. Although the Ministry ought to be in possession of the data, EMG should not have responded in that manner to the request, assuming that the reports in the media are true and correct. To this end, the provisions of the Petroleum Agreement (2016) comes into effect:
Article 9.1 (a) of the Petroleum Agree-ment, “the Contractor shall, at all times while this Agreement is in force, maintain and submit to the Minister in accordance with the provisions of the Act and the Regulations, the Petroleum Production License and this Agreement, full and accurate reports, records, returns and accounts of Petroleum Operations in the Contract Area; (b) establishes… “all data, well logs, maps, magnetic tapes, cuts of cores and cutting samples and all other geological and geophysical information obtained by the Contractor in the course of carrying out Petroleum Operations hereunder and all geological, technical, financial, and economic reports, studies and analyses generated in relation thereto shall be submitted to the Minister in accordance with the Regulations”.
Article 9.1 (d) establishes… “Petroleum Data shall be the joint property of the Minister and the Contractor… “; Article 23 (1) – Accounting and Audits Article establishes that “the Contractor shall be responsible for maintaining accounting records relating to Petroleum Operations under this Agreement with the Accounting Procedures set out in Annex C hereto”. Article 23.2 establishes that “the Minister shall have the right to audit the accounting records of the Contractor in respect of Petroleum Operations in accordance with Accounting Procedure”. Article 23.3 establishes that “nothing in this Article shall be construed as limiting the right of Government or any officer of Government pursuant to any statutory power to audit or cause to be audited the books of the Contractor”, and Article 31 – Miscellaneous establishes that “in the event of any conflict between any provisions in the main body of this Agreement and any provisions in the Annexes, the provision in the main body shall prevail”.
Annex C – Accounting Procedure 1.2 Documentation required to be submitted by the Contractor
a) The Contractor shall keep the accounts, operating records, reports, and statements relating to the Petroleum Operations: (i) in accordance with the terms of the Agreement and this Accounting Procedure; and (ii) in such form as may be agreed from time to time between the Parties which shall identify the categories of costs, expenses, expenditures, and credits classified in Sections 2 and 3 of this Annex. (b) Pursuant to (a) above, the Contractor shall make quarterly Statements relating to the Petroleum Operations including:
(i) Production Statement (see section 5 of this Annex).
(ii) Value of Production and Pricing Statement (see section 6 of this Annex).
(iii) Statement of Expenditures and Receipts (see section 7 of this Annex).
(iv) Cost Recovery Statement (see section 8 of this Annex).
(v) End of Year Statement (see section 9 of this Annex).
(vi) Budget Statement (see section 10 of this Annex).
Annex C Section 1.5 of the Petroleum Agreement (2016) prescribes the scope of the Audit and Inspection Rights of the Government. Specifically, Section 1.5 (a) states that…” for the purposes of auditing, the Minister may audit, examine, and verify…all charges and credits relating to the Contractor’s activities under the Agree-ment 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”.
Based on my interpretation, records and inventories and any records necessary to conduct the audit includes the production data, which forms a substantive part of the Petroleum operations. In accordance with the provisions in the Petroleum Agree-ment that governs the audit and inspection rights of the Government, together with the provisions contained in Articles 9, 23, 31 and Annex C Section 1.2, 1.5, the Contractor is contractually obligated to supply the auditors with production data and any other information and/or documentation requested by the auditors, in order to properly conduct the audit and inspection exercise on behalf of the Government.
Sincerely,
Joel Bhagwandin
