Latest update December 12th, 2024 1:00 AM
‘Secure clean-up money from oil companies to avoid taxpayers footing the bill’
– Commonwealth urges Guyana
By Renay Sambach
Kaieteur News – The Commonwealth Secretariat is urging its member countries to secure money to restore the ocean’s floor at the end of the economic life of oil and gas projects, in order to avoid taxpayers having to foot the bill.
The Commonwealth Secretariat recently published a practical guide called, “Oil and Gas Decommissioning Toolkit,” which is aimed at helping its member countries in the oil and gas industry to manage costly oil and gas decommissioning activities.
President of Guyana, Irfaan Ali
The process of restoring the ocean’s floor when an oil and gas project has come to an end is called ‘Decommissioning.’ Kaieteur News had reported that decommissioning is a complex and costly process at the end of the economic life of an individual oil and gas project. It involves the safe plugging and abandoning of oil wells, removal of structures and restoration of the surrounding areas.
This publication had highlighted the Commonwealth Secretariat cautioning its member of the uncertainty of decommissioning costs, which can result in the price tag easily moving from US-millions to US-billions. The Secretariat stated that given the uncertainty of decommissioning cost, “it is critical that there are mechanisms in place to ensure that there are sufficient funds available to carry out the decommissioning activities.”
It was highlighted too that in the instance of an oil company failing to clean-up the ocean’s floor, “If such a situation arises, governments will likely have to undertake and pay for decommissioning, because it is in the public interest and/or because it is required to meet the country’s international obligations.”
In this regard, the Secretariat urged Governments to secure financial assurance and implement appropriate assurance mechanisms to avoid taxpayers having to foot the bill for decommissioning costs. There are different types of financial assurance mechanisms, which range from letters of credit, insurance and bonds to cash being held as dedicated funds for decommissioning purposes, it was highlighted. Notably, Guyana has been a member of the Commonwealth since 1970.
In Guyana’s instance, American oil giant, ExxonMobil’s affiliate, Esso Exploration and Production Guyana Limited (EEPGL) has been taking out money from Guyana’s oil production for decommissioning which is being kept in their pocket. Under a signed deal – the Production Sharing Agreement (PSA) – Exxon is allowed to take out money to set aside as a decommissioning fee.
While the revenue should be set aside in a special account, and held by the Government – the Exxon PSA jumps off the precipice of international best practice, and into a bottomless pit of abnormality on this front. ExxonMobil and its partners which include Hess Corporation and CNOOC Petroleum Guyana Limited are able to benefit from a lopsided system that allows them to keep decommissioning funds in their pockets. As such, Guyana must now hope, pray, and trust that when the time comes, Exxon will hand over the sums needed.
Moreover, the Commonwealth explained that Governments should have policies and regulations in place that require oil and gas companies to estimate decommissioning costs and update them regularly.
According to the Secretariat, the decommissioning toolkit was developed as part of the Commonwealth Secretariat’s Natural Resources Programme, which aims to support governments in managing the risks from decommissioning, containing several key elements like: an overview of the key issues and implications for governments; practical recommendations to effectively manage decommissioning; a checklist to identify areas for strengthening the existing legal requirements and model decommissioning provisions that can be adapted to countries circumstances.
- Commonwealth Secretariat, Commonwealth Secretariat’s Natural Resources Programme, Esso Exploration and Production Guyana Limited (EEPGL), Exxon PSA, Oil and Gas
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