Testing the reasonableness of an oil company’s cost estimates has been quite a challenge for oil producing nations. But Oxfam Director, Ian Gary, thinks Guyana may find the Que$tor Software useful in this regard.
During an interview with Guyana Standard, Gary noted that this very software helped Ghana prevent millions of dollars being charged to the country by oil operators.
Gary said, “We spent quite some time doing work in Ghana and the officials of the Petroleum Commission were able to show us some of the software they used to check if the oil companies were being unreasonable in their estimates. One of the tools they used is called Que$tor. They used it to develop alternative engineering designs to test the fairness of companies’ cost estimates.”
“I can also tell you that they used it to challenge Tullow Oil when it wanted to install a Floating Production Storage and Offloading (FPSO) unit at the Mahogany, Teak, and Akasa (MTA) Field, in addition to the one it already had at the Jubilee Field.”
The Oxfam Director said that the FSPO would cost about US$1 billion. With the software, Gary said that Ghana’s Commission found that the second FPSO was unnecessary and that Tullow could simply “tie back” the MTA Field to the existing FPSO.
Gary said, “This cost saving represented US$300 million, almost the same amount Ghana expected to receive in foreign grants in 2017. I’d say that this worked out for the country and Guyana could consider it. I don’t hear anyone talking about this. Perhaps the Government might want to say what software they have acquired to carry out similar tests.”
While pre-approvals are no substitute for cost auditing, Gary said that they provide a critical oversight mechanism that may directly control costs as well as supplement the technical expertise required to verify costs.
Gary said that audits are, by nature, reactive rather than proactive.
“Hence, a review of planned costs by industry regulators is an important safeguard for government revenues. It should also reduce the workload of auditors, allowing them to focus on the level of costs and relevant tax treatment,” the Oxfam Director related.
Research done by the Guyana Standard indicates that the Que$tor: Oil and Gas Cost Estimation software is used by more than 500 energy estimators and managers in 50 countries. It helps users to accurately model oil and gas expenditures and production, create development scheduling and save hundreds of hours in research and analysis. (SEE LINK FOR MORE INFORMATION: https://ihsmarkit.com/products/questor-oil-gas-project-cost-estimation-software.html)