Int’l organisation says… ‘Guyana one oil spill away from losing profits to another global disaster’

Oct 06, 2022 News

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– 6 lawsuits, weak policies point to questionable management of sector

Kaieteur News – The World Bank’s recent findings on Guyana’s poor handling of the oil and gas sector and the fact that some six lawsuits have been filed against the state to force it to adequately protect the environment against possible oil spill damage are all indicators of “weak policy and highly questionable management” of the petroleum sector, Institute for Energy Economics and Financial Analysis (IEEFA) has said.

The international agency which monitors and assesses energy markets, trends, and policies, indicated in its most recent writing on Guyana’s petroleum sector, that the fight to protect the environment from oil spill damage is ramping up as the government has failed to release the details of the ExxonMobil / Esso Exploration and Production Guyana Limited (EEPGL) insurance policy, while a recent oil spill at the Liza 2 project has made the potential danger even more realistic.

IEEFA reminded of the “one-sided” 2016 Production Sharing contract governing the exploration and development of the resource has several provisions benefiting the consortium to the detriment of Guyana. “The latest litigation exposes one of the loopholes. Weak contract terms provide vague protections. And the failure by environmental authorities to enforce even vague protections means Guyana is just one substantial oil spill away from turning its expected windfall into another global disaster.”

“This issue goes beyond Guyana’s borders as oil slicks do not respect geographical boundaries,” IEEFA warned. It said that Payara’s environmental impact assessment shows the project’s potential to damage not only Guyana, but also Trinidad, Tobago, Barbados, Grenada, Bonaire, Aruba, Curaçao, Colombia, the Dominican Republic and Venezuela. “Oil on the beaches is not good for tourism and fishing, two industries that sustain regional economies,” IEEFA urged.

President of the Transparency Institute of Guyana Inc (TIGI) Fredericks Collins and another Guyanese citizen, Godfrey Whyte, moved to the High Court less than three weeks ago to get the Environmental Protection Agency (EPA) to enforce the liability clause in the permits issued to ExxonMobil Guyana and partners. The lawsuit, IEEFA pointed out the terms and conditions expected of insurance coverage and sanctions if its provisions are not carried out. The questions raised in the litigation include therefore, whether Guyana EPA obtained the insurance policy from Exxon and partners, whether EPA ensured ExxonMobil’s commitment to cover the total costs of restoration, cleanup and damage from a spill or well blowout or whether the terms and conditions that are in the insurance coverage comport with the permit, contract and statutes. It also questions whether the companies involved have the resources necessary to cover the costs of a significant spill, which corporate entities are responsible for those costs and how much of the costs are covered by the actual permit agreements. The lawsuit is also demanding that the EPA cancel the permit if the offshore operator does not provide the insurance, guarantees and indemnities required.

IEEFA noted the plaintiff, Frederick Collins’ concern based on former EPA head Dr. Vincent Adam’s utterances that the insurance compliance provisions are being violated and that the EPA had not obtained guarantees that ExxonMobil would cover the full costs of a cleanup. “The plaintiff said Guyana authorities have refused to provide copies of the existing insurance policies that would show the unlimited liability guarantee provided in the permit.”

Based on its observations, IEEFA said that stakeholder’s concerns were amplified by ExxonMobil’s recent disclosure of an oil spill at the Liza 2 site.  The conditions surrounding the discharge and the details of the cleanup were not known when the latest case was filed, and at the same time, the former EPA director had said that ExxonMobil is currently pumping on Liza One at a rate of 150,000 barrels per day, 50 percent more than the permitted rate. “The overproduction, if corroborated, has implications for safety and health risks at the site, as well as increasing the chances of a major failure such as a well blowout or spill. Esso has already acknowledged using a faulty gas compressor that has resulted in gas flaring beyond permitted levels.”

IEEFA said that the concerns raised about the potential for an oil spill are not academic, and that “the 2010 Deepwater Horizon disaster in the Gulf of Mexico should remind Guyana officials of the need to act with dispatch to protect the public.” IEEFA lamented that the BP spill devastated marine life and livelihoods. Although most local economies affected by the BP spill were able to rebound with the benefit of diverse economic bases, the agency warned that, “a country like Barbados—with 22 percent of its economy linked to tourism—faces particularly high economic risks. Neighbouring countries should pay close attention to the lawsuit.”

IEEFA pointed out that out of the six environmental court cases filed so far, four related to government’s failure to properly manage the permit process and enforcement of permit provisions. In one case, the agency said that the courts found that Guyana officials broke the law by improperly granting ExxonMobil a 23-year permit when permits are legally restricted to be five years. The effort by Guyana officials to cut corners and hasten production was overturned by the court.

IEEFA noted that the World Bank review of efforts to reform the programme and bring administrative capacity in line with oil development operations found that Guyana’s management ability is slipping. “The World Bank findings and the six lawsuits point to a weak policy and highly questionable management. The questions raised by the latest litigation and the lawsuits that have preceded it do not bode well for the people of Guyana,” the agency said. The recent lawsuit is the sixth filed over the massive drilling project, is an attempt to ensure that the consortium—ExxonMobil, Hess Corp., and the China National Offshore Oil Corp. (CNOOC)—would be responsible for the costs of an oil spill and not foist responsibility to Guyana taxpayers. Economist Ramon Gaskin, University of Guyana research director, Dr. Troy Thomas, Rights activist Sherlina Nageer and Vanda Radzik are a few of the plaintiffs in other cases.

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