Shareholders to challenge Exxon to come clean on oil spill risks in Guyana in view of Justice Kissoon’s ruling

May 19, 2023 ExxonMobil, News, Oil & Gas

Kaieteur News – An investor group called Mercy Investment Services has disseminated Justice Sandil Kissoon’s landmark ruling to ExxonMobil Corporation’s shareholders for urgent consideration.

The group believes that the judgment is a serious cause for concern as it has ordered the provision of an unlimited parent guarantee for oil spill operations offshore Guyana.

Justice Sandil Kissoon

The group also brought to the attention of shareholders, certain key observations about the May 3, 2023 ruling. The investor group highlighted that Justice Kissoon’s ruling outlined that ExxonMobil failed to comply with the Financial Assurance obligation stipulated in its environmental permit for the Liza Phase One Permit. The group also pointed out to shareholders that by June 10, 2023 ExxonMobil as the parent company of the Guyana subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) must provide unlimited insurance coverage to safeguard Guyana against the “grave potential danger and consequences to the State and citizens” of an oil spill. Failure to comply with the court order would result in the suspension of the Company’s environmental permit.

The investor group also urged shareholders to observe the court’s finding that EEPGL “was engaged in a disingenuous attempt which was calculated to deceive when it sought to dilute its liabilities and settled obligations stipulated and expressed in clear unambiguous terms” in the Liza Phase One environmental permit.

The investor group said the decision affirms that the parent company’s obligations under the environmental permit require it to assume unlimited liability for all costs of “clean up, restoration and compensation for any damages caused by a discharge or any contaminant.” It also took note of the court’s pronouncement that the existing guarantee to the extent of US$2 billion from Exxon “does not fulfill the obligation” of the permit or even what is “considered environmental liability insurance as is customary in the international petroleum industry.”

The group further noted, “For the company to provide an unlimited Parent Company Guarantee Agreement to Guyana clarifies the scope of material liabilities that could fall upon ExxonMobil from these operations. For comparison, estimates suggest the BP Macondo oil spill has cost BP and its drilling partners at least US$71 billion to mitigate the disaster’s effects. Even this figure may continue to increase over time, as the company’s settlement with individuals who filed medical claims immediately after the accident could cost BP well into the future, with more recent lawsuits filed by hundreds of individuals with late-occurring health effects still pending.”

Taking the foregoing points into consideration, the group called for shareholders to vote for its proposal on May 31, 2023 at the Annual Shareholders Meeting which will demand transparency on the liabilities and risks emanating from the Guyana operations.

The group said asset managers and other fiduciaries that seek to exercise due diligence in managing portfolio risks would be well advised to vote in favour of this proposal.