Exxon Mobil Corporation and Guyana’s government are set to begin discussions over a tax dispute involving $214 million in expenses registered by the U.S. oil giant. The country’s Natural Resources Ministry has instructed the tax agency to initiate the resolution process after an audit flagged the costs as potentially overstated.
XOM’s Cost Recovery Under Scrutiny
ExxonMobil leads a consortium operating the massive Stabroek offshore block, where expenses are tightly monitored due to the cost oil mechanism. The arrangement allows ExxonMobil and its partners to claim up to 75% of production for cost recovery, while Guyana receives half of the remaining crude. The government ensures these expenses are audited to confirm compliance with contractual terms.
Audit Finds Discrepancies in XOM’s Expenses
The dispute followed a review by U.S.-based IHS Markit, which audited ExxonMobil’s reported costs from 1999 to 2017. Guyana’s tax authority accepted IHS Markit’s recommendation to adjust XOM’s cost bank by $214.4 million, reaffirming its stance that these costs should not be reimbursed through oil revenues. ExxonMobil was officially notified of this position, though the company has not publicly responded.
Ongoing Review of XOM’s Recent Expenses
ExxonMobil has already recovered $33.9 billion of the $41.1 billion spent in Guyana, according to vice president Bharrat Jagdeo. Meanwhile, a second audit covering 2018-2020, conducted by VHE Consulting, is ongoing. ExxonMobil has responded to preliminary findings, and VHE is currently reviewing them.
The outcome of these discussions could have significant implications for ExxonMobil’s cost recovery structure and its long-term financial relationship with Guyana.
