Strategic Insights for Suriname: Free Lessons from Guyana’s Cost Recovery Audit

Suriname is on the cusp of a transformative journey in offshore development, with the Gran Morgu project in Block 58 poised to deliver significant economic benefits.

As the nation prepares for the evaluation of major amounts of pre-production recoverable costs by 2028, it is crucial to draw insights from neighboring Guyana’s experiences with its first major offshore project.

This essay explores the free strategic lessons Suriname can learn from Guyana’s excellent cost recovery audit, executed by IHS Markit, Upstream Consulting in 2021, emphasizing the importance of robust financial oversight and technical expertise in maximizing revenues and ensuring transparency.

The Significance of Cost Recovery Audits

Cost recovery audits are essential for verifying the legitimacy of expenses incurred by international oil companies (IOCs) during the pre-production phase.

These audits ensure that only justified costs are approved for recovery, safeguarding the financial interests of the host country. Suriname, as it advances towards full-scale offshore production, must prioritize establishing robust auditing mechanisms to uphold contractual integrity and foster a transparent investment climate.

Lessons from Guyana’s Audit Experience

Guyana’s audit of pre-production costs in the Stabroek Block revealed several key areas of scrutiny, including:

• Pre-Contract Expenditures: Ensuring that all costs incurred before the contract are valid and compliant with the Production Sharing Agreement (PSA) terms.
• Cost Documentation: Maintaining meticulous records of all expenses to facilitate transparent auditing processes.
• Compliance with PSA Terms: Ensuring that all activities and costs align with the agreed terms of the PSA.

The audit process highlighted the need for clear cost definitions and rigorous record-keeping to prevent financial discrepancies and ensure transparency.

Personal Insights from Auditing Experience

Having participated as a geologist with the official Audit Team in Suriname, I was able to swiftly identify and clarify a significant discrepancy of nearly $2 million the very first day.

This discrepancy had remained unresolved through previous audits, despite visits to the IOC’s headquarters in Houston.

The solution was straightforward: the contract allowed the IOC to adjust the day rate of the rig when mobilizing from Trinidad to offshore Suriname. This experience underscores the importance of technical expertise in financial audits.

Understanding Well Drilling Costs

To effectively audit deductible well drilling costs, auditors must have a comprehensive understanding of the entire sequence of operations involved in drilling a well.

This knowledge brings clarity to the receipts and costs incurred, making the audit process more efficient and accurate. Without this understanding, auditing can become a tedious and confusing task.

The Importance of Proactive Cost Verification

Implementing proactive cost verification strategies is crucial for Suriname to maximize revenues and uphold contractual integrity.

By learning from Guyana’s audit experience and strengthening financial oversight, Suriname can position itself to foster a transparent investment climate and ensure sustainable resource management as it enters full-scale offshore production.

Conclusion

As Suriname advances in its offshore development journey, it is essential to integrate the lessons learned from Guyana’s cost recovery audit. By prioritizing robust auditing mechanisms, clear cost definitions, and meticulous record-keeping, Suriname can maximize its revenues and ensure transparency in its financial dealings with IOC’s. This proactive approach will pave the way for sustainable resource management and economic growth.

This essay aims to provide a comprehensive analysis of the really free strategic insights Suriname can gain from Guyana’s cost recovery audit experience, emphasizing the importance of robust financial oversight in the oil and gas industry.

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