6th oil project permit reveals Citizens will have to take ExxonMobil to Court to fight for compensation from oil spill

Apr 15, 2024 News

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…as Govt. to decide amount of cash for parent company guarantee

 

Kaieteur News – The Environmental Permit obtained by ExxonMobil Guyana Limited (EMGL) for its sixth oil project in the Stabroek Block- Whiptail- does not require an unlimited parent company guarantee to fully protect the nation against the perils associated with a major disaster that may occur.

In the absence of such a guarantee, citizens in Guyana, and even those that may be affected beyond this nation’s borders, will have to fight in the Courts to seek compensation from the ExxonMobil. This is outlined in the Permit approved by the Environmental Protection Agency (EPA) for the Whiptail development, on April 10, 2024. Section 14.1 of the Permit states, “The Permit Holder and its Co-Venturers (CoVs) are liable for all costs associated with clean up, restoration and compensation for any damages caused by any discharge of any contaminant, including the cost of all investigations into pollution incidents or discharge of contaminants, conducted at the instance of Agency.”

To ensure the Permit Holder and its CoVs are able to cover its “legitimate liabilities arising under the Permit and the Act”, EMGL shall provide, to the Agency or the State a written declaration of the Permit Holder and its CoVs’ financial capabilities to fulfill all environmental liabilities as required by the Act and the Permit. To this end, three pieces of documentation are required, including a written declaration to the Agency of the Permit Holder and its CoVs’ financial capabilities to fulfill all environmental liabilities as required by the Act and the Permit and evidence of insurance. The third requirement is Financial Assurance, in the form of a Guarantee Agreement that must be to the satisfaction of the government.

The Permit requires, “Financial Assurance, in the form of a Guarantee and Indemnity Agreement issued in favour of the Government of the Co-operative Republic of Guyana (represented by the Agency), as beneficiary, by each of either the parent company or an affiliate of each CoV covering the liabilities under this Permit…for a cumulative amount guided by the estimate described in Condition 14.3 and in a form as further described in condition 14.6 (hereafter referred to as the “Guarantees”).”

The Whiptail Permit makes it clear that the insurance and financial assurance provided shall be “guided by an estimate of the sum of the reasonably credible costs, expenses, and liabilities that may arise from any breach of the Act and this Permit.” This means that the assurance will not be a signed “unlimited guarantee” but will be capped at a specific sum. Section 14.3 of the document goes on to note, “Liabilities are considered to include costs associated with responding to an incident, clean-up and remediation and monitoring. Such cumulative amount required is not expected to include costs which may be associated with compensation for loss and ongoing damage to other parties, and which are able to be pursued through civil proceedings.”

This means that citizens will not be protected from an oil spill in the Permit granted by the EPA but will be required to fight the oil company in Court for compensation in the event of a spill.

While the oil spill guarantee does not protect citizens, the insurance Exxon is required to provide also fails to mention coverage for the livelihoods of citizens that can be affected. The EPA however did reserve the right to require further insurance as necessary. The insurance must cover and will not be limited to (a) loss or damage to all assets used in the Project; (b) well control; (c) environmental damage caused in the course of the Project for which the Permit Holder will be, jointly and severally, held responsible, including clean up; (d) loss or damage to property or bodily injury suffered by any third party in the course of the Project for which the Permit Holder is liable to; (e) the cost of removal of wreckage and clean-up operations required as a result of an accident occurring in the course of permitted activities; and any other requirements made by the Agency.

 

About Whiptail

The US$12.7B deepwater project was sanctioned by the GoG on April 11, 2024. Whiptail will target an estimated resource base of more than 850 million barrels of oil and include up to 10 drill centers and 48 production and injection wells. The floating production, storage and offloading (FPSO) vessel for Whiptail, which will be called Jaguar, is already under construction.  Exxon is aiming to produce 250,000 barrels of oil per day at the project by the end of 2027. According to project documents, the Whiptail project will develop the Whiptail, Pinktail, and Tilapia fields, along with potential additional resources, if determined to be feasible and economically viable. Based on ExxonMobil’s plans, six oil ships with a gross production capacity of more than 1.2 million barrels of oil per day are expected to be online on the Stabroek block by the end of 2027, to develop the estimated gross discovered recoverable resources of more than 11 billion barrels of oil equivalent. The Stabroek block covers 6.6 million acres (26,800 square kilometers) and is operated by ExxonMobil’s affiliate with a 45% interest. The company’s partners in the block are Hess Guyana Exploration (30%) and CNOOC Petroleum Guyana (25%).

 

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• compensation, guarantee, oil, spill, Whiptail

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