Offshore spills can bankrupt oil companies – ExxonMobil Guyana Projects Manager says

Sep 17, 2023 ExxonMobil, News, Oil & Gas

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Kaieteur News – The destruction caused by an oil spill can be so massive that petroleum companies can be financially bankrupted in paying out compensation for disruption to livelihoods and cleaning up the slick which can take up to months.

Highlighting this stark reality was the Projects Manager of ExxonMobil Guyana Limited (EMGL), Anthony Jackson during a public engagement on September 12, 2023, at Leonora, West Coast Demerara (WCD).

The Projects Manager was at the time responding to a query from a concerned Guyanese during the consultation for the operator’s sixth project, Whiptail. The citizen, who only gave his name as ‘Ghansham’, sought an explanation from the oil company as to what would become of his country should a spill occur offshore. He appealed for a response during the meeting since he said there was simply no other forum for him to seek clarity on the situation. He noted that his question has been bothering him for some time since he is aware that the Court has yet to make a decision regarding the unlimited parent company guarantee to protect the country from having to foot such costs.

Jackson in responding to the query explained that EMGL has provided a US$2 billion guarantee to the Environmental Protection Agency (EPA) to respond to a spill that may occur in the Stabroek Block. This is in addition to the US$600 million insurance policy per oil spill event that is in place.

He said, “We have as a company committed to being responsible for mitigating the impacts of a potential oil spill. I like to explain to folks first when it comes to oil spills, our first priority is to keep the fluids contained in the vessels, in the pipelines, in the container vessels that goes from the flow lines up to the FPSO (Floating Production Storage and Offloading vessels) on to tankers – our priority is to keep those fluids where they are supposed to be.”

In underlining the importance of containing the crude oil, Jackson said, “We as a company, publicly traded, oil spills have a tendency to almost bankrupt oil companies so we have a very vested interest to make sure that we get all of our precautionary measures…but I do think that the important element outside of the precautionary and the financial guarantees that we provide, it’s important to understand a little bit about the emergency response actions that are part of our response plan.”

Oil spill and Guyana’s economy

Even as EMGL has admitted that an oil spill can bankrupt multibillion-dollar petroleum companies, there is yet to be a study conducted on what such an event can cost Guyana. This was confirmed by Exxon’s consultant, Environmental Resources Management (ERM). https://kaieteurnewsonline.com/2023/09/13/exxonmobil-never-examined-cost-of-an-oil-spill-to-guyana-caribbean-nations-public-meeting-on-6th-project-hears/

It would be poignant to note that Guyana’s economy runs on a mere fraction of what ExxonMobil Corporation is worth. This only serves to highlight the catastrophic financial impacts the country can face. Notably, the Bank of Guyana (BoG) in its most recent quarterly report of the Natural Resource Fund (NRF) stated that up to June 16, 2023, inflows to oil account- since production first commenced in December 2019- are only US$2,677,861,216.

The meager revenue earned from the sector is reflective of the lopsided Production Sharing Agreement (PSA) Guyana inked with ExxonMobil and its partners – Hess and CNOOC. The arrangement allows for 75 percent of the monthly earnings to be deducted by the Co-Venturers to recoup their investments. The remaining 25 percent is then split between Guyana and Exxon, with the country receiving 12.5 percent and an additional two percent royalty.

According to the 2022 Annual Report submitted by EMGL, the Stabroek Block generated a gross revenue of US$9.8 billion, however, the company deducted a whopping US$7.4 billion towards the recovery of its investment for petroleum-related activities. Meanwhile, Guyana barely received US$1.4 billion in revenue.

Without a parent company guarantee, Guyana could be left responsible for footing the cleanup and compensation costs associated with an oil spill that can reach as many as 12 Caribbean islands, according to studies conducted by Exxon. Modeling predicts that an unmitigated oil spill can reach Trinidad and Tobago, Aruba, Bonaire, Curaçao, Grenada, St. Vincent and the Grenadines, St. Lucia, Martinique, and Barbados as well as the Dominican Republic, Haiti, and Jamaica.

The cost would be dependent on the volume of the spill but a major disaster according to specialists can expose US$140 billion of economic activity in the Caribbean to risk.

Countries within pathway of potential oil spill from Guyana have US$140B of economic activity at risk

With only approximately US$2.7 billion earned to date from the two oil projects in operation, the question would therefore be ‘where would Guyana find the additional financial resources from’ to respond to such a disaster.

This has been troubling the minds of Guyanese who have resorted to the streets in demand of an unlimited parent company guarantee from Exxon that would cover damages caused above the US$2.6 billion financial assurance presently in place.

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• Anthony Jackson, associated, EMGL Projects Manager, Martinique, St Lucia, St. Vincent and the Grenadines

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