Exxon cheated Guyana on pre-contract costs – Christopher Ram says

Exxon cheated Guyana on pre-contract costs – Christopher Ram says

Attorney-at-Law, chartered accountant and transparency advocate Christopher Ram, is of the position that ExxonMobil has cheated Guyana in millions of United States (US) dollars, claimed to have been spent by the oil major.
During his appearance on the Kaieteur Radio programme, The Glenn Lall Show: Tell It as It Is, Ram told listeners that, “Their (Exxon) own figures suggest that they have overcharged Guyana,” Ram said, “and they have never responded to the open accusation that I have made.”

The accusation that the attorney refers to is his charge that Exxon’s claim of US$460M pre-contract costs is overstated by at least US$92M. Ram’s calculation found that all figures supplied by the companies, even when one allows for all expenses and expenditures, amount to a far cry from the US$460,237,918 that Exxon and its partners, Hess and CNOOC Nexen are claiming.

Even then, Ram says that his assessment was generous. He had said that it is overstated by “at least” US$92M, because not all expenditure is recoverable as pre-contract costs. Ram reminded that the bill that Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), submits to Guyana comes out before anything else during profit sharing, while adding that the only “saving grace” in the contract is that in any year, the total recoverable cost cannot exceed 75%.

But even with this cap on recoverable costs, Guyana will still have owed Exxon and its consortium of oil companies US$20B by 2025, as shared by the Director of Finance under the Institute for Energy, Economics and Financial Analysis (IEEFA), Tom Sanzillo.
It is against this that Ram argued that the Guyana’s leaders are prepared to starve their own citizens, so as not to offend these foreign investors. “That cannot be right. There must be some equity in it all,” he notes.

The PSA states that the 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 (USS 460,237,918) in respect of all such costs incurred under the 1999 Petroleum Agreement prior to the year ended 2015, “and … such cost as incurred under the 1999 Petroleum between January 1, 2016 and effective date which shall be provided to the Minister on or before October 3, 2016 and such number agreed on or before April 30, 2017.”

For purposes of this paragraph, the term pre-contract cost includes contract costs, exploration costs, operating costs, service costs, general and administrative costs, and annual overhead charge as those terms are defined in the 1999 Petroleum agreement.
Meanwhile, Commissioner-General of the Guyana Revenue Authority (GRA) Godfrey Statia recently revealed that his agency has completed one phase of the auditing of the pre-contract costs. A report of the findings has since been handed to Exxon for its response.

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