Government must secure and publish certificates from Exxon to prove wells can produce above safety levels – OGGN

Aug 07, 2023 Sports

---

Kaieteur News – In the absence of a parent company guarantee to safeguard Guyana against footing costs associated with an oil spill, the Government of Guyana (GoG) must require the Stabroek Block operator, Esso Exploration and Production Guyana Limited (EEPGL) to provide certificates from independent auditors to prove oil production vessels operating offshore Guyana can produce above the prescribed safety levels.

This is according to the Oil and Gas Governance Network (OGGN) – an environmental advocacy group. In a recent letter to this newspaper, the body called on the GoG to obtain and publish such documents, given that the oil operations have already exceeded their safe working level of production.

The letter was signed by prominent Guyanese Scientist, Alfred Bhulai, Janette Bulkan, Darsh Khusial, Andre Brandli, and Professor Kenrick Hunte.

In their missive, the citizens pointed to the fact that the Environmental Impact Assessments (EIAs) drafted by the consultancy firm Environmental Resources Management Inc. for EEPGL (Exxon’s subsidiary), the safe working level for the Liza Destiny was 120,000 barrels of oil per day (bopd).

The advocacy body noted that “Liza Destiny is now producing at 150,000 bopd according to Hess, and even higher, according to the website of the Government of Guyana.”

Meanwhile, the group also observed that the second Floating Production Storage and Offloading (FPSO) vessel, Liza Unity is rated at 220,000 bopd but is also producing an additional 30,000 or more. “So together the two FPSOs are 60,000 bopd over the nameplate production levels, at a combined level of around 400,000 bopd,” OGGN said.

To this end, the group noted that in the absence of the parent company guarantee it is “only logical and prudent” for the GoG to make these demands on Exxon, as the country awaits the outcome of the court case seeking full liability coverage to help safeguard Guyana from the burden of cleaning up after an oil spill.

The OGGN believes that stress test certificates that indicate the health of the FPSO vessels is at optimal level will help offer some assurance to Guyanese at the interim.

In fact, the advocacy group pointed out that such a request aligns with industry best practices which require the suppliers of components of complex machinery to provide certificates of assurance that the components will perform as advertised, up to safe working and maximum levels.

The group said it is almost certain that the suppliers of components to FPSO constructor SBM Offshore at Keppel shipyard in Singapore have provided such certificates, and that SBM has had such certificates independently audited by qualified risk assessors.    “Likewise,” the OGGN said “the parent company ExxonMobil Corporation would have required overall certificates from SBM for each FPSO as a whole.”

OGGN said it finds it necessary for this certificate to be supplied to the government and shared publicly, given the reluctance of the ExxonMobil-led consortium to provide the parent company letters of guarantee for complete liability coverage as required by the Environmental Protection Agency (EPA) permits.

OGGN contends that the certificates should demonstrate that continuous production at 400,000 barrels of oil per day has been audited as safe by accredited industrial risk assessors.  Alluding to the recent earnings reported by Hess and Exxon in the second quarter of 2023, the group said the oil majors have expressed great optimism for the future.

The group explained, “They were very optimistic about the future because of their big bet on Guyana. By 2027, they are projecting to be pumping 1.2 million barrels of oil per day. With the oil companies currently taking 85.5% of revenues, they can’t help but gloat to their shareholders and financial analysts about Guyana. Hess said by 2027, the cash unit cost for barrel would be US$10/barrel. If prices hover around the current US$83/barrel, then that would be a massive windfall for the oil companies. Thus, in 2027, the oil companies would walk away with US$26.7 billion in cash profits while Guyana would earn US$5.3 billion on its oil. The oil companies have a sweet deal given Guyana would bear the majority of the risks in a massive oil spill.”

Meanwhile, in referencing the decision of Justice Sandil Kissoon, the group stressed that Guyana and its neighbours are currently exposed to bankruptcy from a massive oil spill without a parent company guarantee.

OGGN stressed, “The parent oil companies would keep their earnings in such a disaster because subsidiary earnings flow back to the parent company, not their liabilities. Hence, the Government of Guyana should be diligent in ensuring that the equipment used at Liza 1 and Liza 2 are certified for the current level of oil production.”

---

• Exxon’s subsidiary, Gas Governance Network, Likewise, The Government of Guyana

---