Countries within pathway of potential oil spill from Guyana have US$140B of economic activity at risk

May 28, 2023 News

– A government that is prepared to bend the rules in favour of one company is weak, unstable – Int’l Financial Analyst

Kaieteur News – While it is widely reported, that an oil spill from the Liza Phase One Project, currently producing over 150,000 barrels of oil, could affect 12 Caribbean states, Financial Analyst, Tom Sanzillo recently alluded that the impacts of such a risk should not be taken lightly.

International Financial Analyst, Tom Sanzillo

According to the Liza Phase One Environmental Impact Assessment (EIA), it states that a spill “would likely impact marine resources found near the well, such as sea turtles and certain marine mammals that may transit or inhabit the area impacted by a spill.” It would also have trans boundary impacts on portions of Venezuela, Trinidad and Tobago, Grenada, St. Vincent and the Grenadines, and St. Lucia.

In a recent column published by the Institute for Energy Economics and Financial Analysis, Sanzillo said the islands located within the path of a potential oil spill from the Guyana project produce more than US$140 billion of economic activity annually, largely based on the maritime and tourism sectors. He alluded that these countries such as Trinidad and Tobago, by virtue of the source of such revenues cited, face financial risks from an oil spill in Guyana.

Taking this into account, along with the economic decimation that would occur for Guyana, Sanzillo finds it troubling that ExxonMobil Corporation is pushing for Guyana to only accept a US$2B parent guarantee for oil spills when the company is worth over US$430B.

He also finds it odd that the company is refusing to comply with a court order which calls for an unlimited parent guarantee for the Liza Phase One Project. That guarantee has to be provided by Exxon for its subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) which operates the Stabroek Block. Justice Sandil Kissoon in a May 3, 2023 ruling has given Exxon up to June 10, 2023 to comply with his ruling or face the suspension of the Liza Phase One Permit which he says unequivocally calls for unlimited coverage.

EEPGL as well as the Environmental Protection Agency (EPA) have since appealed to stay the order. The company’s recent defence is that it already has several layers of insurance that more than cover any credible costs. According to published reports, the coverage amounts to more than US$20 billion. Exxon claims local affiliates have US$19Bin assets, insurance totalling US$$600M and the recently finalized US$2B parent guarantee.

In the wake of the judge’s decision, Sanzillo said the eyes of the world are now focused on the Guyanese government’s enforcement actions. He said, “The government faces an institutional conflict between the revenue it receives from oil extraction and the health and safety of its people. In this instance, the government has no choice. A court order has to be obeyed.”

Sanzillo added, “But it is disturbing that the country’s officials are taking Esso’s side against the judiciary and the people of Guyana. A government that is prepared to bend the rules in favour of one company is a weak and unstable government.”

The analyst further noted that the economic risks to Guyana are clear. He said, “ExxonMobil has the resources to clean up a spill. Guyana does not.” Without a parent company guarantee, Sanzillo believes Guyana risks economic decimation if left to pick up the bill for an oil spill from EEEPGL’s operations. Trying to dismiss this as “environmental” litigation he said, will no longer work.