British firm paid US$300,000 to audit US$460M Exxon pre-contract costs

Having finally secured someone to audit ExxonMobil’s cost oil claims, Energy Department Director Dr Mark Bynoe has announced that the company, IHS Markit, has already begun its work.
Bynoe made the announcement during a press conference at the Department of Energy’s new office in Brickdam, Georgetown on Monday. He explained that the contract, to the tune of over US$300,000, will be for a four-month duration.
“The contract for the firm to complete the cost recovery audit, the historical cost, was signed. The contract was awarded to IHS Markit and the company has commenced its work with an in-country visit from December 9 to 11, 2019.”
Bynoe further explained that in addition to his Department, the Guyana Geology and Mines Commission (GGMC) and the Guyana Revenue Authority (GRA) will also be collaborating with IHS Markit on the project.
“The Department of Energy and the GGMC will be working along closely with the GRA, on this project. Additionally, the Department of Energy has secured external legal expertise to assist the audit process,” Bynoe said.
“It runs for four months; the full team will be on the ground early January. They have already presented to us their work plan.
IHS Markit is the product of a 2016 merger between two companies, United States (US) based IHS and London-based Markit. Its data and information services business caters to industries such as automotive, energy, financial services, defence and maritime.
The company is no stranger to Guyana’s oil sector, having published a number of write-ups and analyses on Guyana’s efforts to develop its capacity. This includes ‘Guyana’s deepwater areas will remain competitive, despite changes to fiscal terms (IHS Markit, 2018)’ and ‘How activity in the Guyana mini basin is booming with five exciting discoveries since 2015 (IHS Markit, 2017)’.
Earlier this year, GRA Commissioner General Godfrey Statia had announced that five audit firms had been shortlisted from a pool of 14 applicants vying to conduct audits into the over US$400 million in cost oil claims submitted by oil giant Exxon Mobil to the Government.
He had referenced the World Bank US$35 million Development Policy Credit to Guyana, noting that money from this will enable the Government to procure the services of the accounting firm to do the cost oil analysis. Statia also revealed that Exxon was co-operating with the Authority.
According to Annex C of the Production Sharing Agreement (PSA) Guyana signed with Exxon, pre-contract cost “shall include four hundred and sixty million, two hundred and thirty-seven hundred thousand and nine hundred and eighteen United States Dollars (US$460,237,918) in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015.”
So far, Esso Exploration and Production Guyana Limited (EEPGL, Exxon’s local subsidiary) has made 14 oil finds in the Stabroek Block over 100 miles offshore Guyana, including four for this year.
Last year, the company made five discoveries. These discoveries have pushed the total estimated recoverable barrels of oil equivalent to over six billion. In addition, Exxon is moving ahead with its Liza Phase Two project, which will contain approximately 30 wells.
ExxonMobil has estimated the recoverable resource in the block to be 5 billion oil-equivalent barrels. At US$50 a barrel, that equates to well over US$200 billion. In addition, an independent assessment, or competent people’s report, had found that 2.9 billion barrels of oil existed in the Orinduik Block.
Exxon is expected to use revenue from its production in order to recoup its capital investment. Whatever remains of this is the “profit oil” Guyana will have to split with the oil company and its associates.
The Liza Destiny, Guyana’s first Floating Production Storage and Offloading (FPSO) vessel, arrived in Guyana’s waters at the end of August. The vessel will play a key role in oil production, which was originally scheduled to begin in the first quarter of next year but has been moved up to this month.