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US$2B oil spill guarantee a ‘glass key’- PNCR
…says Guyana may not be able to access sum in the event of a disaster
Kaieteur News – The People’s National Congress Reform (PNC/R) has equated the US$2B oil spill guarantee submitted by ExxonMobil, Hess and CNOOC to a glass key.
Opposition spokesman on oil and gas, Elson Low
Spokesman on petroleum related matters, Elson Low in an exclusive interview with this newspaper, registered some of the concerns of the political party- chief among those was the slim chances for the country to access the finances to aid in clean up and compensation following a major disaster.
Low pointed out that the document requires the government of Guyana to show how Exxon has not met its obligations. According to the Guarantee and Indemnity Agreement, 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.
The document makes it clear, “In order for the Beneficiary (GoG) to exercise its rights under this Guarantee and Indemnity Agreement, the Beneficiary must provide to the Guarantor at the Guarantor’s address stated in Section 4.4, written notice, signed by an authorized representative of Beneficiary (the “Notice”), of EEPGL’s Default of the Environmental Obligation…”
The notice to the guarantor must detail the environmental obligation(s) that is (are) purported to have been defaulted on, including the legal basis giving rise to the environmental obligation (s) in question; how Exxon failed to satisfy the applicable Environmental Obligation(s) and the unpaid amount for which the company is liable for. To this end, Low explained, “we are concerned that without an unlimited parent company guarantee there is scope for oil production and service companies to fight among each other, in the course of an urgent crisis, to apportion blame… in so doing, it could easily become a dispute over whether a contractor providing faulty works or the oil company is liable. This could be used as an excuse not to pay, thereby causing a significant delay to clean up efforts.”
Moreover, the PNC/R pointed out that the agreement also shield the guarantor from paying costs to Guyana, since the country allowed the operator of the Stabroek Block to produce oil above the safe operating limits. “The guarantor could argue that the government of Guyana, having approved operations beyond nameplate capacity, bears some liability, and thus deny our claim on the guarantee.” To this end, he, reasoned, “This document is a glass key. It’ll break off in your hand when you try to open the door.”
The Guarantee and Indemnity Agreement was lodged by the Stabroek Block partners on June 9, 2023.
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.
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 EPA by June 10 or the Liza Phase One Project Permit would be suspended.
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