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ExxonMobil disappointed with Judge’s decision for not acknowledging their financial capabilities
Kaieteur News – ExxonMobil Guyana on Friday afternoon said it is disappointed that the High Court Judge, Justice Sandil Kissoon did not acknowledge its financial capabilities and that of its co-venturers, when he handed down his ruling on Wednesday that the company must provide the country with a parent company guarantee, that covers costs above the insurance policy.
ExxonMobil Guyana President, Alistair Routledge
Esso Exploration and Production Guyana Limited (EEPGL), the subsidiary of ExxonMobil, said it is reviewing the Court’s decision and evaluating its next potential steps. It however said, “It is disappointing that the court failed to appreciate and acknowledge the financial capabilities of ExxonMobil Guyana and its co-venturers to meet their obligations, the insurance we already have in place, and the progress towards agreeing to a guarantee that exceeds industry benchmarks.”
The guarantee the company was referring to is a US$2 billion coverage. The Court however believes that oil spill expenses should not be capped and therefore ruled that an unlimited parent guarantee be supplied within 30 days.
EEPGL nevertheless noted yesterday that the company and the Stabroek block co-venturers “have adequate and appropriate insurance and proposed guarantees in an amount that exceeds industry precedents and an estimate of potential liability.”
In a strongly-worded ruling, Justice Kissoon noted that the Environmental Protection Agency (EPA) had shelved its statutory responsibilities in exchange of a derelict and submissive deposition, leaving “Guyana and its people in grave potential danger of calamitous disaster.”
According to the judge, the circumstances of the case exposed the existence of an egregious state of affairs that engulfed the EPA in a quagmire of its own making.
In his estimation, the judge found that ESSO was never in doubt as to what its liabilities are, as captured under Condition 14 of the renewed permit for the Liza Phase 1 Petroleum Production facility as the stipulations were neither, unusual, unique nor unauthorised in the industry.
He said “It was simply as a matter of law, fact, and consequence the norm that prevails which bound ESSO as singularly and exclusively responsible for all liabilities without restriction ….from its operations at the Liza Phase 1 Petroleum Production facilities, in the Stabroek Block offshore Guyana.”
In concluding the case, the Court noted that Parent Company Guarantee as mandated by Condition 14 should be in place. It was therefore determined that “If the unthinkable occurs, and there is an event in the Stabroek Block resulting in the release of hydrocarbons then Esso, and to the extent that it is unable to do so as it is largely an assetless subsidiary without financial resources, then EXXON, the Parent Company comes into play.”
The court noted that EXXON continues to derive a benefit from the operations of its subsidiary and will cover the liabilities and obligations of Esso as stipulated at Condition 14:01. As such, Justice Kissoon reasoned that “If, however, that event occurs and there is no uncapped Parent Company Guarantee in place to indemnify the State, then the State is liable for all that occurs. It is simply not open to the permit holder to say it is engaged in a frolic of its own, aided and abetted by the EPA, to unilaterally, arbitrarily and unlawfully cap its unlimited liability and financial assurance.”
Justice Kissoon emphasised therefore that a Parent Company or Affiliate Company indemnity or guarantee to the extent of $2 billion does not fulfill the obligations of the permit holder at Condition 14:10 and, in such circumstances, Esso will remain in breach. “There is no hurdle to the provision of the unlimited parent company guarantee and the unlimited affiliate company guarantee agreements stipulated at Condition 14:10 of the Permit.”
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