Vice President Bharrat Jagdeo has indicated that should Esso Exploration and Production Guyana Limited (EEPGL) fail to justify the $214M in expenses that were flagged by auditors during the country’s first cost recovery audit on oil expenses, the claims will be disallowed and the revenues directed to profit oil.

But the Guyana Revenue Authority (GRA) has cast doubt on the entire audit report, claiming that the auditors, IHS Markit failed to comply with international audit standards and practices.

Speaking to reporters on the sidelines of the Local Content Summit on Tuesday, the Vice President, while denying that the Government kept the audit report on the claims made by the oil company a secret, said the report, which covered the period 1999 to 2017, was actively engaging the attention of the GRA.

The audit report found that of the US$1.67B in claims made by the US oil giant for its operations in the Stabroek Block, claims totalling US$214M were flagged by the UK audit firm.

“It has to go through a procedure. So, if the audit finding, in the preliminary finding you have the contested cost, you have to get the company to respond. So, you have to send it over, the company responds, they are then required to submit additional documentation. If they can’t submit additional documentation, then the cost is disallowed. It comes out of the cost bank, and goes towards profit oil,” the Vice President explained.

In a statement last night, the GRA accused IHS Markit auditors of breaching the contractual agreement signed in November 2019.

It explained that under the agreement, IHS Markit was required to provide three distinct reports – the Initial Audit Report, the Intermediate Audit Report and the Final Audit Report, however, the audit firm on March 20, 2020 submitted the Initial Audit Report, and later on July 31, 2020, the Final Audit Report.

“The Guyana Revenue Authority noted that there was a breach of contractual terms, as well as, Audit Standards and good practices when IHSM attempted to by-pass the Interim Audit Report requirement,” the revenue authority explained.

According to GRA, through the Department of Energy, IHS Markit was informed that it cannot submit a Final Audit Report until the Esso Exploration and Production Guyana Limited has been issued with a ‘Written Report’ in conformance with the Production  Sharing Agreement (PSA).

According to the PSA, a written report must be submitted to the contractor within 60 days of the conclusion of the audit. The contractor is then required to respond to the report no later than 60 days, indicating acceptance or rejection of the audit claim, and in the case of a rejection, justify with an explanation.

“This means that the contractor, in accordance with the stipulations of the PSA and Audit standards, must be allowed to respond to the ‘Written Report’ or Draft Audit Report. The response of the Auditee, along with the additional evidential material provided, must be taken into consideration whilst compiling the Final Audit Report,” GRA further explained.

It said two iterations of the ‘Audit Report’ were issued by IHSM between July, 2020 and November, 2020, however, GRA, upon review the report, penned its concerns highlighting a number of issues.

According to GRA, together with the Natural Resources Ministry, it is actively reviewing the “Final” Audit Report and all Subsidiary Reports for the period 1999 to 2017. It said when completed, the findings shall be made public.

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