Latest update September 17th, 2026 10:25 AM
US$2B oil spill guarantee due for upward revision
Executive Director of EPA, Kemraj Parsram
Kaieteur News – The US$2B oil spill guarantee lodged by ExxonMobil, Hess and CNOOC is due for an upward revision in keeping with the terms of the agreement.
The Guarantee and Indemnity Agreement signed by the Environmental Protection Agency (EPA) on June 9, 2023 states at Section 2.2, “The Parties recognize that an estimate required under Condition 14.3 of Environmental Permit No. 20160705-EEDPF issued on the 27th day of October 2022 was utilized to arrive at the Maximum Amount.”
If however, “with respect to activities under the Petroleum Agreement there are either: i) additional petroleum development activities, including exploratory activities within the Stabroek Block, or ii) any material change in the estimate required to be made under the aforesaid Environmental Permit No. 20160705-EEDPF issued on the 27th day of October 2022, or iii) any material change in any estimate of liability similarly required under another relevant Environmental Permit pertaining to petroleum development activities, including exploratory activities within the Stabroek Block, iv) or any other change in environmental risks or circumstances that would reasonably impact the estimated liability; then, if requested by either party, the Guarantor, the Beneficiary and the Operator shall promptly re-negotiate the Maximum Amount.”
Importantly, the US$2B guarantee has been cited as the floor amount and will not decrease. The parties shall enter negotiations to modify the terms and conditions of the agreement by providing at least three months written notice of its intent to do so.
Since the agreement was signed by the regulator, another oil project was approved by the EPA for ExxonMobil to produce as much as 250,000 barrels of oil per day. The sixth development, Whiptail, was sanctioned by the EPA on April 10, 2024. It’s project poses an increased risk of an oil spill, as outlined in the Environmental Impact Assessment (EIA) which therefore justifies the upward revision of the guarantee.
Executive Director of the EPA, Kemraj Parsram while appearing as a guest on the Energy Perspectives Podcast said the US$2B sum was not “pulled from a hat” but was determined as the “reasonable credible cost” using guidelines from the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) of Australia.
“We looked at what our Act says about financial assurance and strengthened those requirements (by) looking at what exists in other jurisdictions … we looked at NOPSEMA in Australia, we looked at UK, we looked at other (parts such as the) US and Canada and we put in key measures because our act says financial assurance has to be at an amount,” Parsram explained.
He continued, “How do I come up with that amount? I can’t just pull it out of a hat, so I looked at NOPSEMA guidelines and they have to require an estimate of the reasonable credible cost of an oil spill and then that will be able to give you some guidance of what it will cost and so we have done that and we have an initial value and we have put in place an agreement- it’s all in the public domain.”
The EPA boss was keen to note that the guarantee will only be tapped if the permit holder defaults in its obligation to clean up the spill. According to him, the EPA has also required the companies to submit an annual declaration of its balance sheet to prove its capacity to cover its liabilities.
To this end, he pointed out that the US$2B amount will increase with the approval of more projects in the Stabroek Block. “With increasing risk and increasing development, that estimate can go up…it’s there as the floor and with increasing risk it can go up.”
Moreover, he noted that if a spill occurs and the EPA has reason to tap the guarantee and the sum required is more than the US$2B guarantee, the EPA can negotiate a further amount with the guarantor to satisfy the compensation required.
It must be noted that stringent conditions have been set in the contract for Guyana to access compensation from the guarantee.
For instance, the country will first be required to write each of the three guarantors informing of the company’s failure to meet its legal financial obligations. See more here: https://kaieteurnewsonline.com/2024/05/26/exxonmobil-and-partners-set-stringent-conditions-for-guyana-to-access-us2b-oil-spill-guarantee/#:~:text=Kaieteur%20News%20%E2%80%93%20Before%20the%20Government,meet%20its%20legal%20financial%20obligations.
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