10 months later… Still no parent company oil spill guarantee from ExxonMobil and partners

Sep 25, 2022 News

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…Jagdeo says they are not the ones pumping oil in Guyana

By Zena Henry

Kaieteur News – Despite not being the operator within the Stabroek Block and not holding any permits to conduct petroleum production here, Vice President Bharrat Jagdeo says that ExxonMobil and partners, the parent company for Exploration and Production Guyana Limited (EEPGL), has nonetheless committed to providing extra protection for Guyana in the event of an oil spill to the tune of US$2B. Whether this commitment/agreement has been put into writing; a statement, an addendum, or any such document to ensure its validity, the Vice President did not state.

Instead, when questioned about the “paltry” parent company coverage during his recent appearance on Kaieteur Radio’s The Glenn Lall Show, he told the host that the additional coverage is what was offered and will be provided by the oil consortium.  “So that is what has been negotiated and that is the guarantee that the parent company said that they will do,” Jagdeo posited. Further pressed on ensuring the availability of full cover liability; inclusive of the stated US$600m per project, as well as the parent cover above what EEPGL could handle financially, Jagdeo clarified that while Exxon and company are not the one’s operating in Guyana, they are still willing to offer coverage above the insurance for each project and the value of the company’s assets that could be liquidated under dire circumstances. The parent company coverage, the Vice President explained further, is to ensure immediately, cash in hand that would prevent the EEPGL from having to liquidate its assets to cover its oil spill liabilities.

The Vice President said that all permits currently demand parent company coverage on top of whatever insurance is provided per oil project. However, when pressed again about Guyana not having the parent company guarantee in writing, Jagdeo reminded that Exxon and company are not the operators here, but are still supposed to be guaranteeing the US$2B sum. He explained that in understanding the issue, it must be noted that, “EEPGL is a Guyanese registered company. They have the permit from the EPA (Environmental Protection Agency). Therefore, this Guyanese registered company has a permit from the EPA. There are three investors that own this company, China National Offshore Oil Corporation (CNOOC) Hess and Exxon; they own the company. So, the company (EEPGL) now has gotten a permit from the EPA and they have to meet all their obligations to clean up any spill or any other environmental liability.”

“This company,” he continued, “has taken out US$600M per event insurance so that company is paying for that. Secondly, this company has assets valued US$6B. So assuming it fails to meet the US$600M; can’t address a spill, to clean it up or meet all of its liabilities; the Guyanese public or the EPA has call(ed) on their assets of US$6B.”

“Now the parent guarantee,” he added, “is for financial resources because that’s assets that they have in the FPSOs and the other fixed assets, immovable assets. The parent guarantee is just to provide the financial resources in that period so that they don’t have to liquidate their assets to deal with any oil spill.”

“So the parent companies are not paying for the oil spill,” Jagdeo said, “They are not operating in Guyana. EEPGL is the operator and the owner of the assets. They have the permit. So the investors, they’re liabilities; they have agreed on top of EEPGL insurance and on top of its assets, that they are going to layer this with a US$2B basically cash flow, so that the company has money immediately to deal with any environmental liability.”

To clear up further, any mix up on who is operating the Stabroek Block, Jagdeo charged that “no environmental permit was given to Exxon,” the international company. The environmental permits provided by EPA, Jagdeo said, requires the permit holder, as soon as reasonably practical, to provide parent company or affiliate companies guarantees to the EPA, undertaking to add adequate financial resource for the permit holder and its co-ventures to pay or satisfy their environmental obligations. The Vice President agreed that EEPGL is a subsidiary of Exxon, and when asked, reiterated that it is a limited liability company registered in Guyana with a US$600M insurance policy, “that we are paying for because we are part of the…” The Vice President did not expound on his statement regarding Guyana’s role in the payment of this policy.

It must be noted, however, that it was since last November that Vice President Jagdeo had told members of the media that efforts were apace by his government to secure the up to US$2B from ExxonMobil to cover any damage that may result from the US$9B Yellowtail Project, the fourth to be developed in the prolific Stabroek Block.  The talk about securing the US$2B commitment came after many criticisms from stakeholders regarding the absence of any formal guarantee from ExxonMobil that it would cover in full, the cost shortfall associated with an unmitigated spill not covered by EEPGL. Acceptance of that US$2B commitment, as it was highlighted then, means today that the Yellowtail Project falls into the same bracket of other Exxon-led projects without confirmed full liability coverage; the Liza Phase One, Liza Phase Two and the Payara Project.

Jagdeo had said at the time, that the government is constantly seeking to improve the permits. “…in the one we are looking at in the Yellowtail Project, we are looking for a generic position where the parent company, ExxonMobil, will now guarantee; well we are looking at maybe up to US$2B for any damage caused here… because from the beginning, there was no parent guarantee. It was implicit but…that is crucial for us as we move forward.”

Following the most recent announcement that there was a spillage of one barrel of crude oil from the Exxon operation some two weeks ago, the AFC, as well as other stakeholders, reiterated calls to the government to put in place full coverage liability for petroleum production as is required by the permits and demanded by many citizens. They said that Exxon previously reported that “no more than one tablespoon” of crude oil had been spilled since the commencement of oil production in Guyana. This amount has now risen to one barrel, by volume, the AFC said; “…an over 10,000 percent increase, that highlights that the possibility of a major oil spill is high, and will continue to increase directly proportional to increased oil production.”

The party added that the EPA oversight mechanisms needed to be strengthened as it is unacceptable for the agency to be solely relying on the (Stabroek Block) operator, for information on spillages and other hazard during oil production operations.

 

 

 

 

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