Every Man, Woman and Child in Guyana Must Become Oil-Minded – Part 78 – November 22, 2019
Introduction
Mr. John Hess CEO of Hess Corporation disclosed that his company paid US$30 million for a 30% stake in ExxonMobil’s Stabroek Block. This revelation, publicised in the Kaieteur News on November 19, 2019, is sure to have caused some discomfort to Exxon which has adamantly refused to confirm or deny that it has received but not properly accounted for significant sums not only from Hess but also from CNOOC/Nexen and from Shell, a former partner in the Stabroek Block.
Let us recall that the forty-fourth column of this series published on May 18, 2018 was titled Pre-Contract cost numbers do not add up. That column included a Table constructed from the audited financial statements of the three contracting companies (Esso, Hess and CNOOC/Nexen) which hold the vast swathe of petroleum blocks offshore Guyana.
Recall that the 2016 Petroleum Agreement signed by Raphael Trotman and the Minister responsible for petroleum called on Guyana to recognise as pre-contract cost the sum of US$460,237,918 up to December 2015 in addition to such sums incurred between January 2016 to the effective date of the Agreement, all of which had to be agreed on or before April 30, 2017. Those figures were set out not in the Agreement proper but close to the back of Annex C to the Agreement.
Strange Numbers
The Table forming part of Column # 44 showed that “at the very least”, the claim of US$460 million was overstated by approximately US$92 million. My opinion of its being “the very least” was based on several considerations, the first being that not all expenditure qualifies as recoverable pre-contract costs. I noted for example that Esso had close to US$5 million in current assets, mainly in inventory, which will be expensed as they are placed into use and consumed. I argued that such expenditure should they be expensed when used and therefore could not be included as pre-contract cost.
A more significant matter was any money paid to Exxon by participating companies in the Stabroek Block which resulted in Exxon’s share declining from 100% to 45% in that most lucrative Block. In that column I drew attention to a statement by Hess that it had acquired a “participating interest in the Stabroek Block” while the company’s ultimate parent company reported to its international stockholders that it had acquired a “working interest”, which is another term for farm-out. I also noted that in 2008, Esso had entered into an Assignment Agreement and a Farm-out Agreement with Shell which would have also had financial implications. And sticking to the same column, I referred to CNOOC’s statement that it had acquired its interest from ExxonMobil, which was never a party to any Petroleum Agreement. In that column I asked Esso to confirm whether that statement was correct, and if it was how much money, if any, was paid.
Contempt for Guyanese
The problem I have with Exxon’s and Esso’s conduct in Guyana is that it surpasses arrogance and borders on contempt for the Guyanese public. Guyanese have an absolute right to all information concerning Esso’s operations in Guyana: we take seriously section 2 of the Petroleum Act which states that “The property in petroleum existing in its natural condition in strata in Guyana is hereby vested in the State, and the State shall have the exclusive right of searching for and getting such petroleum.”
This past week as a motley group of oil people descended on Guyana, Hunter Farris, Senior Vice President (Upstream Oil and Gas Deep Water) of ExxonMobil told an audience which included Raphael Trotman in the front seat that “Our ExxonMobil Guyana company is just that – a Guyanese company.” That is complete nonsense and ignorance. ExxonMobil does not operate in Guyana. The operating entity in Guyana is Esso Exploration and Production (Guyana) Limited, a Bermudan company which has registered as an external company under the Companies Act.
Our media should have pressed
No doubt his presence in Guyana was tightly managed but I cannot but help being saddened that our local press corps did not do more to get an interview with him. Perhaps they tried but “at the very least” (here I go again), a series of questions should have been prepared and submitted to him. He ought to answer questions not about the details of the pre-contract costs but whether ExxonMobil or the Bermuda shell company was involved in these inflated numbers and whether he supports an independent audit of the numbers.
Farris ought to have been asked about ExxonMobil’s record on bribery of locals including Third World politicians; its manipulation of data on global warming; its support for the Paris Accord; and whether he thinks that a lopsided contract negotiated by applying duress can be considered fair.
We do not know how much of a stake Shell had bought into Esso’s 1999 Agreement. We know however how much Hess paid for its 30% interest – US$30 million. Using that as a basis, it is fair to assume that CNOOC would have paid at least US$25 million for its 25% share. The Guyana Dollar value of the combined sum is north of eleven billion Dollars.
Conclusion
John Hess cares not for one minute for Guyanese, seeing our country in the same way as the pirates and wealth seekers did half a millennium ago. Ironically however, he has been more honest than ExxonMobil and CNOOC/Nexen. He has provided us with first-hand information which none of his partners would ever admit, let alone volunteer. He boasts that our Government pays the taxes on the bonanza profits his company would earn in Guyana.
We will soon have First Oil. The event will be historic. But sadly and dangerously, we have as a partner an oil company that has not displayed any scruples in conducting its business around the world. If Farris really wants to make their ExxonMobil Guyana company a Guyanese company, then let ExxonMobil offer shares to the Government of Guyana, have its workers unionised and let it display transparency and integrity, characteristics which have so far been missing. And immediately, have ExxonMobil state how much it received from Shell, Hess and CNOOC/Nexen and importantly where those moneys went. Until then, it stands accused.
By Chris Ram
Article originally published at: https://www.chrisram.net/?p=2137
