Latest update April 24th, 2024 12:25 AM
Jul 07, 2021 News
Stabroek Block PSA reveals…
– Can only bill oil companies for “reasonable costs and expenses”
Kaieteur News – According to the 2016 Stabroek Block Production Sharing Agreement (PSA), ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), is expected to take all reasonable measures in accordance with international petroleum practice to remedy any pollution such as an oil spill that occurs as a result of its operations.
However, should Exxon not act promptly in this regard, the Government is expected to take action following which, it can bill the contractor but only for “reasonable costs and expenses” that occur.
Highlighting this aspect of the PSA in his recent writings was Chartered Accountant and Attorney-at-Law, Christopher Ram. The columnist noted this aspect of the contract as being quite absurd since airlines have to give bonds or lodge deposits in the event that there are potential claims against them but oil companies in Guyana, which are arguably engaged in the riskiest business of all, have no such obligation.
He also highlighted the fact that none of the Stabroek Block partners namely Esso, Hess Corporation or CNOOC Petroleum Guyana, made provisions for an oil spill. He was able to ascertain this following a review of the companies’ financial statements for 2020. What he did discover however is that the companies have already made plans to recover $67B for decommissioning which will take place in another 20 years. Decommissioning refers to the safe removal of the pieces of equipment that have been attached to the seafloor to extract the oil. These include special pipes and platforms.
Ram had previously highlighted that the companies are being allowed to charge Guyana for an activity that will occur in the next two decades, is not only an anomaly, but also an area for gross manipulation and abuse since the decommissioning plans have to be approved first by the Government before they can be executed. It therefore leaves one to question how the Stabroek Block partners could know years in advance, what they would be spending and move to recover same now.
Over the past two years, this newspaper has reported on the fact that Guyana is yet to receive official documentation or any piece of evidence for that matter to say that ExxonMobil would stand the costs for clean up and restoration programmes, following any oil spill by its subsidiary from the Liza Phase One, Liza Phase Two, and Payara projects.
In the absence of full coverage insurance, stakeholders have expressed deep concern about the billions of dollars in expenses Guyana would be left with following any irreparable damage that follows from an oil spill.
What has also left stakeholders in a deep state of worry is the fact that Guyana has no independent study on the potential harmful effects on its marine life from an oil spill. There is also no provision in the Production Sharing Agreement for the Stabroek Block, which ensures ExxonMobil would undertake to do such a study and provide compensation should Guyana, be affected in this way.
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