Guyana Sues Exxon Over $12B Valuation Error, Hearing May 10

Key Takeaway

• Guyana sues Exxon over a $12 billion equipment valuation error, with court hearing set for May 10.
• Clerical mistake led to the overvaluation; Exxon and supplier Ramps Logistics vow to prevent future errors.
• Incident triggers Guyana's review of past invoices, affecting oil revenue calculations and prompting an audit compliance from Exxon.

Court Summons Over Valuation Error

Guyana's tax authority has initiated legal action against Exxon Mobil Corp. following a significant overvaluation of oil-well equipment by one of its suppliers. The equipment's value was erroneously inflated to approximately $12 billion, a figure 200 times its actual value. This incident has led to a summons issued to the oil giant, with a court hearing scheduled for May 10. The Guyana Revenue Authority, under Commissioner-General Godfrey Statia, is spearheading this legal challenge.

Clerical Error Acknowledged

The overvaluation issue was attributed to a clerical mistake, as explained by both Exxon and Ramps Logistics, the Trinidad-based supplier involved. The error occurred when the equipment's value was denoted in US dollars instead of Guyanese dollars, with the latter being significantly less valuable (one Guyanese dollar equals about one-half of a US cent). Exxon's country manager, Alistair Routledge, emphasized that the error was identified early, ensuring that "nobody suffered any loss." Following this incident, Exxon has updated its procedures to prevent a recurrence of such errors.

Implications for Guyana's Oil Revenue

The accuracy of cost declarations is crucial for Guyana, as the country's production sharing contract with Exxon stipulates that the government's share of production is calculated after deducting costs. This incident has prompted Guyana's Vice President Bharrat Jagdeo to announce a comprehensive review of past invoices to ensure no overstatements have occurred. Exxon has recently approved its sixth development project, which is expected to double its production capacity to 1.3 million barrels a day by 2027, highlighting the significance of accurate financial reporting for the nation's oil revenue.

Audit Compliance and Resolution Efforts

In response to the incident, Exxon has agreed to comply with an audit to review past invoices for any potential overstatements. Ramps Logistics has described the overvaluation as an "unfortunate" mistake, with Chief Operating Officer Shaun Rampersad expressing commitment to resolving the issue. The company acknowledges the mistake and is working closely with the relevant authorities to address any concerns.

Management Quotes

• Godfrey Statia, Commissioner-General of the Guyana Revenue Authority:

  "The Guyana Revenue Authority issued a summons to the oil giant, with a hearing is scheduled for May 10."

• Alistair Routledge, Exxon country manager:

  "The error was caught early, and nobody suffered any loss. The company has updated its procedures to make sure it won’t be repeated."

• Bharrat Jagdeo, Vice President of Guyana:

  "We are now ensuring that before we finalize the second audit that the GRA will go back and check all the back invoices for the past several years to see that there has been no overstatement... Exxon has agreed to comply with the audit."

• Shaun Rampersad, Chief Operating Officer of Ramps Logistics:

  "It was a mistake. There were some issues that happened in the system, and it is something that we are committed to working with them on."