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EPA Head commits to ensuring Guyana takes best approach to decommissioning – Says agency will learn from mistakes made by other nations
Pull quote: “Decommissioning refers to returning the environment to its original state or doing as much as you can to get it back to that state…In some cases, that is not always possible. Sometimes you can do more damage when you remove it. But we would have to be satisfied that this is so.”
By Kiana Wilburg
When the life of an oil project nears its end, the operator engages in a process called decommissioning. This calls for the removal of equipment and other special materials that would have been attached to the sea floor for the extraction of the oil. The cost of this activity can run into billions of dollars for the operator. Through various tricks, many operators have been able to leave countries saddled with this expense.
EPA Head, Dr. Vincent Adams
But Head of the Environ mental Protection Agency (EPA), Dr. Vincent Adams says that this will not be Guyana’s destiny. He assured during an interview on Kaieteur Radio that the EPA will learn from the lessons of other nations and ensure that the country is protected. He said it is for this reason that the conversation of decommissioning is already taking place in conjunction with the Department of Energy.
Dr. Adams said, “Decommissioning refers to returning the environment to its original state or doing as much as you can to get it back to that state…In some cases, that is not always possible. Sometimes you can do more damage when you remove it. But we would have to be satisfied that this is so.”
The EPA Head said, too, that Guyana’s recent membership with the International Offshore Petroleum Environment Regulators (IOPER) will also provide assistance on this front. The IOPER is a collaborative group of national regulators whose members are dedicated to raising environmental performance standards within the offshore petroleum exploration and production industry.
As far as he is aware, Dr. Adams said that the costs for decommissioning will be handled by Exxon Mobil and all the other oil companies, while noting that broad terms to this effect are included in their permits. He noted, however, that more specifics have to be built in to those documents going forward.
Overall, the EPA boss said he wants what is best for Guyana, while drawing on the lessons learnt by other nations. He noted that some countries have established decommissioning funds which the oil companies make a contribution to. Dr. Adams said he is supportive of such an option for Guyana.
DECOMMISSIONING FUND
Since decommissioning is considered one of the most crucial aspects of an oil project, several oil-producing nations have moved in the direction of establishing funds which the oil company or operator makes payments to, so that when the time for decommissioning or abandonment comes, the countries use that Fund to handle the associated expenses.
In the case of Liberia, the country ensured that ExxonMobil signed onto such an agreement.
In fact, a 2013 Production Sharing Agreement (PSA) it has with Exxon expressly states that when each oil field has reached 50% of its productive capacity, which, for the sake of clarity means that 50% of the estimated recoverable Petroleum has been produced from such Field, the Contractor shall submit a revised Abandonment or Decommissioning Plan along with a budget for same to be approved by the government.
Within 90 days of said approval, an Abandonment Fund would be established. It is held in an interest-bearing escrow account with an escrow agent approved by Liberia’s Ministry of Finance. The PSA states too that the account shall be established at an international bank of good financial standing.
The same Abandonment Fund, the PSA notes, shall receive the funds for all Fields. Importantly, the PSA states that any portion of the Abandonment Fund not required for or used, the Plan shall be transferred to benefit the State. If Liberia finds that the Abandonment Fund is insufficient to complete the approved Abandonment Plan, Exxon is also required to pay all additional costs needed.
In Guyana’s case, however, the PSA signed with Exxon for the Stabroek Block makes no provision for such a Fund, much less the foregoing provisions.
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