Exxon dodges KN’s request for full disclosure of formula used to arrive at US$2B parent guarantee

May 23, 2023 News

Kaieteur News – Guyanese, it appears, may never know the formula used by an independent consultant to determine that US$2B was an adequate enough a sum to be provided as a parent guarantee by ExxonMobil Corporation for oil spill liabilities in the Stabroek Block. Last week at a press conference, Kaieteur News made pointed requests for this information to be made public but those demands were dodged by Head of ExxonMobil Guyana, Alistair Routledge.

The Exxon official had said the independent consultant was paid for by his company and utilized standards from Australia. Routledge said he believes that the US$2B guarantee from ExxonMobil is adequate and adds to the US$600M insurance package already provided by Exxon’s subsidiary and Stabroek Block operator, Esso Exploration and Production Guyana Limited (EEPGL).

He further noted that EEPGL has a growing pool of assets which currently stands between US$18B to US$19B. He said those assets can be used to cover any liabilities regarding a spill.

Routledge said too that the sum was arrived at taking into consideration all “credible and reasonable costs” that are likely to arise during an unmitigated oil spill scenario at the Liza Phase One Project which is producing about 155,000 barrels of oil per day.

While the Liza Phase One Environmental Impact Assessment (EIA) includes examples showing that oil can flow into the Caribbean, affecting a dozen of Guyana’s counterparts such as Trinidad and Tobago, Routledge said, “That is a worst-case scenario and not a credible case.” He said it is true the company is required to examine all scenarios. He said however that this is done with the aim of informing all the protective and mitigative measures that ought to be adopted. Routledge stressed that the basis of the parent guarantee estimate has to reflect what is reasonably credible.

Expounding further he said, “So it is the worst credible case [one must consider], given the investments made [by the partners in the block] on prevention and mitigation. It is important that you reflect that in that decision-making.”

Routledge also noted that the documents pertaining to the US$2B insurance guarantee are being finalized with the other partners on the block, namely Hess Corporation and CNOOC, and will soon be provided to the Environmental Protection Agency (EPA).

He also contended that US$2B parent guarantee is in line with the demands of the Liza Phase One Environmental Permit, though a court ruling has found otherwise.

That ruling was handed down on May 3, 2023 by Justice Sandil Kissoon in relation to a case filed last September by two Guyanese. Justice Kissoon had disregarded copies of unsigned documents that were presented to him on the US$2B parent guarantee. He categorically stated in his ruling that the Liza Phase One Environmental Permit calls unequivocally for an unlimited parent guarantee agreement, adding that anything less leaves EEPGL and its partners in breach of the permit.

He has since given EEPGL as well as the EPA to comply with the provisions of the permit by June 10 or see its suspension. Both parties have since appealed the case, the judgment for which is expected on May 29.

Internationally, the ruling has had a significant impact on Exxon’s stock price. It plunged by 12 percent in recent weeks to US$105.

ExxonMobil shareholders have also taken note of the ruling and are poised to challenge the oil giant to come clean about the potential risks and liabilities of its operations which could affect not only Guyana but 12 other Caribbean nations. That challenge is expected to manifest by way of two proposals come May 31 at Exxon’s Annual Shareholders Meeting.

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Environmental Permit, Exploration and Production Guyana Limited, Routledge, Sandil Kissoon, Stabroek Block

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