Latest update February 23rd, 2025 1:40 PM
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Guyana must ensure ‘clean up money’ available before oil projects end – Analyst
…country could foot bill if Exxon walks away
Kaieteur News – According to the 2016 Production Sharing Agreement (PSA) signed between the country and an ExxonMobil Guyana-led consortium—the joint venture is required to clean up and safely remove subsea infrastructure after it has emptied all the oil and gas from the respective fields.
This clean up exercise is done approximately two decades after operations begin at certain fields in the Stabroek Block. Interestingly, Guyana’s authorities have allowed Exxon and its partners to start recovering the clean up money even before a cent is spent.
But of even more concern, is that while Guyana has afforded Exxon and its partners this unusual privilege, the country seems to have no plan in place to ensure the companies actually have money set aside for the cleanup activities.
Director of the Institute for Energy Economics and Financial Analysis (IEEFA) Tom Sanzillo, is adamant that this is not the way things are done in the oil industry.
Sanzillo said, “ExxonMobil is going against industry standards in Guyana by receiving US$3.2 billion for decommissioning costs that is required to be set aside for decommissioning and clean-up in the country.”
The IEEFA analyst said that ExxonMobil continues to benefit from the system, which requires Guyana to pay for costs of decommissioning wells in advance with no oversight of the company. At this point, ExxonMobil and its oil partners have a real opportunity to pocket millions—if not billions—with no accountability, the IEEFA noted in a report.
“If they take the money, sell the project before the wells are decommissioned and pass the liability onto a weaker company, Guyana’s taxpayers could be left footing the bill,” Sanzillo highlighted.
“With no provision to ensure the money paid upfront will be available in 20 years, there is a real chance that the taxpayers of Guyana could be left footing the bill.”
Sanzillo reiterated that, ExxonMobil stands to earn big from this arrangement. He said it would do the country well to have additional disclosures regarding decommissioning which would benefit the people of Guyana.
Furthermore, Sanzillo pointed out that the decommissioning loophole, “…is yet another example of Guyana being shortchanged under its existing petroleum agreement with ExxonMobil, Hess, and the Chinese National Offshore Oil Company.” Sanzillo noted that ExxonMobil and its partners benefit from a system that requires the country to pay for decommissioning in advance installments, which starts from the beginning of the contract.
“Guyana then relies on the companies to pay for the decommissioning 20 years later. Industry practice establishes that a trust account should be set up for such a fossil fuel drilling and extraction project. The trust account can only be used to pay for the abandonment costs when they occur. However, Guyana’s agreement does not require that a trust account be established.”
Last year, International Lawyer, Melinda Janki called out the government for not ensuring measures to protect the advanced decommissioning payments.
In a letter to the press, she said that, Guyana’s wells are ultra-deep and very dangerous. Decommissioning is expensive, she said, pointing to the IHS Markit Report 2021, which also estimated that some US$3.1 billion would be needed for the decommissioning of the Liza and Payara wells.
“Clearly, the government, as servants of the people of Guyana, have a duty to ensure that the Guyanese are not left to pay this US$3.1billion (roughly G$651 billion) or more for decommissioning. The government must therefore ensure that Esso puts this decommissioning money into an escrow account to pay for decommissioning and nothing else.”
Janki and Sanzillo, were recent panelists on a webinar hosted by international non-profit organisation, Avaaz hosted webinar where they urged the Guyanese government to put certain measures in place before it renews Exxon’s Liza Phase One Environmental Permit.
Avaaz has also started a global campaign with thousands of signatories urging the Environmental Protection Agency to not renew Exxon’s Liza Phase One permit which comes to an end on May 31, 2022 due to environmental and financial inefficiencies.
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