Capping stack does not dissolve need for unlimited parent company guarantee for oil spills - Opposition

Capping stack does not dissolve need for unlimited parent company guarantee for oil spills – Opposition

Jul 14, 2024 News

The capping stack that is now in the country

Kaieteur News – The arrival of a capping stack in-country to respond to a blown out well during oil production activities does not dissolve the need for an unlimited parent company guarantee to ensure the country is not left to foot the costs associated with such a disaster.

Highlighting this point during the Leader of the Opposition’s weekly press conference on Friday was Economist and Oil and Gas spokesperson for the People’s National Congress Reform (PNC/R), Elson Low.

In an invited comment, he told Kaieteur News that it is always important to have safety equipment to be able to respond to a spill, however, these tools cannot be solely depended on to protect the country.

Low explained, “It is always of course useful that we have additional safety equipment here in the event of an oil spill; however, there have been instances in the past where safety equipment has not been able to function effectively.”

He continued, “Oil spills are notoriously difficult to contain quickly, you would have seen with the Deep Water Horizon spill that there was a failure in fact of the equipment that they brought to cap that well and that failure of equipment led to a prolonging of the oil spill.”

To this end, the Opposition made it clear that while the additional equipment will be useful, it is no substitute for an unlimited parent company guarantee and appropriate oil spill insurance.

He said, “It (the capping stack) is no substitute for a parent company guarantee and appropriate insurance so we need to continue to push for that and we need to bear in mind that these kinds of safety equipment while useful do not in any way guarantee that the country is insulated all together from an oil spill.”

Exxon on Monday commissioned the country’s first capping stack, one of 13 available globally and one of only two in Latin America.

A capping stack is a heavy piece of metal equipment that is placed over a blown out well. It acts as a plug, thereby preventing further flow of hydrocarbons.

Presently, Guyana has a US$2B oil spill guarantee that was lodged by the operator of the Stabroek Block, ExxonMobil Guyana Limited (EMGL) and partners, Hess and CNOOC.

Appeal Court Judge, Justice Rishi Persaud had ordered ExxonMobil Guyana to lodge a US$2B parent and/or affiliate company guarantee as a condition to a stay of execution granted on a lower court’s order. That order, originally issued by High Court Judge, Justice Sandil Kissoon called for an unlimited parent company guarantee to be provided to the Environmental Protection Agency (EPA) by June 10 or the Liza Phase One Project Permit would be suspended.

The Guarantee and Indemnity Agreement was lodged by the Stabroek Block partners on June 9, 2023, following an appeal of the ruling by the EPA and Exxon. The government has also applied to join the matter to fight against full oil spill coverage for the country.

ExxonMobil, the operator of the Stabroek Block, holds a 45% interest, while Hess Guyana Exploration Ltd. holds 30% interest and CNOOC Petroleum Guyana Limited holds 25% interest. Each Co-Venturer has contributed to the US$2B guarantee, relative to its participating interest in the Stabroek Block. Jamestown Insurance Company Limited is the Guarantor for Hess; while CNOOC Limited, a company organized in Hong Kong and Exxon Equity Holding Company is the Guarantor for CNOOC and Exxon, respectively.

Presently, more than 640,000 barrels per day is being produced from three projects in the Stabroek Block. Notably, all three Floating Production Storage and Offloading (FPSO) vessels are producing above the original design capacity, sparking safety concerns among stakeholders, especially as the country does not have the unlimited oil spill guarantee from the parent company.

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Capping stack, low, opposition, Parent Company Guarantee, spill, unlimited

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