ExxonM shareholder group worries about their pockets should there be an oil spill in Guyana

May 10, 2023 News

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…files proposal to see report on impacts of a worst-case scenario

Kaieteur News – A key shareholder group for ExxonMobil Corporation is concerned about the safety of the oil giant’s Guyana operations. Specifically, Mercy Investment Services Inc. has filed a proposal, that if approved at an Annual Shareholders Meeting on May 31, 2023, Exxon would be forced to prepare a report on a worst-case scenario for an oil spill in the Stabroek Block.

The proposal expressed an interest to have Exxon issue a report evaluating the economic, human, and environmental impacts of a worst-case oil spill from its operations offshore in Guyana. The report would clarify the extent of the company’s cleanup response commitments given the potential for severe impact on Caribbean economies.

As long term investors in ExxonMobil, the group said it is concerned that the company’s existing disclosures on increased production fail to also address what are the worst-case spill vulnerabilities in its Guyana operations.

It was keen to highlight that the tragic BP Deepwater Horizon disaster is widely recognized as one of the worst environmental disasters in US history and exemplifies the potential reputational and financial damage Exxon could be exposed to in the event of a similar disaster. The investor group highlighted that BP Macondo oil spill has cost drilling partners at least US$71 billion to mitigate the disaster’s effects. That sum is expected to increase as more lawsuits have been filed by hundreds of individuals with late-occurring health effects.

Taking the far-reaching impacts of the BP spill into account, the group said Exxon’s operations in Guyana are concerning, especially after noting local media reports of an increased production at the Liza Phase One Project.

The group highlighted in its proposal that the company’s design capacity for the Liza Destiny vessel operating at the Liza Phase One Project is 100,000 barrels of oil per day (bopd) with the safety threshold being 120,000 bpd, an entirely different figure than the current 150,000 bopd.

The group said, “To be clear, the company is both operating above design capacity and exceeding its safety threshold for Liza Phase One, the potential impact and risk of which has not been assessed by its existing disclosures.”

Apart from its concerns regarding increased oil production, the investor group said a special report is needed on Guyana to consider the economic and environmental implications of an oil spill that would last beyond 30 days. It believes investors ought to know the impacts of an extended duration of a spill.

The proposal also requests that the company’s spill assessment consider severe weather conditions. In this regard, it was noted that as the impacts of climate change are manifesting worldwide, scientists estimate that by just 2050, intense hurricanes and typhoons could more than double in nearly all regions of the world. This timeline is well within that of the company’s Guyana operations, with the Payara development project operating through at least 2053.

The group believes that Exxon’s disclosures should account for the projected increased frequency/severity of natural disasters in the Caribbean region resulting from climate change to adequately assess the potential impact of a spill. Hurricanes cause about 25% of offshore platform-related spills; thus, an increased prevalence of storm activity could present a greater risk of spill to the company via infrastructure damage.

The shareholder group also said Exxon’s has yet to consider the potential impact or response for a scenario of simultaneous well failures. “In fact, the company’s existing disclosures assess the impact of a potential, less severe spill on some aspects of public health and marine ecosystems,” the group said while adding that the proposed worst-case oil spill assessment would entail a release for a significantly longer duration with potentially much broader dispersion of oil with greater human and marine impacts.

Importantly, the group said Exxon ought to clarify its cleanup response commitments given the potential for the severe impact a spill could have on Caribbean economies.
“Many Caribbean countries rely on fishing and ecotourism to support their economies. For example, statistics indicate that the tourism industry in the British Virgin Islands generates an estimated 45% of the national income. Given this liability, the potential costs owed to surrounding countries to clean up a worst-case spill should be clarified for investors,” the group said in its proposal.

The group said it is in the investors’ best financial interests that Exxon assesses and disclose these potential risks associated with a worst-case spill scenario in its Guyana operations.

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• Exxon, Guyana, Liza Destiny, oill spill, Shareholder group

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