US$10B of ExxonMobil’s US$14B assets are oil wells – Annual Report

Sep 09, 2024 News

Oil spill protection for Guyana?

Screenshot of Exxon’s Assets

Kaieteur News – Is Guyana really protected from the financial burdens associated with an oil spill disaster that can occur at ExxonMobil’s ongoing Stabroek Block operations? This question would perhaps be best addressed by the Guyana Government that has since joined an appeal against a High Court order for an unlimited oil spill guarantee.

President, ExxonMobil Guyana Limited, Alistair Routledge

The country’s financial line of defence or response to such an event includes a US$600 million insurance package, offered by a company owned by ExxonMobil, a US$2B oil spill guarantee, and assets which the company said can be sold to take care of its liabilities.

A look at the company’s 2023 Annual Report however raises further concerns about Guyana’s preparedness to respond to any such event, as more than half of Exxon’s assets are production wells, located several thousands of feet below the water surface.

According to the company’s 2023 Annual Report, at the end of December 2023, Exxon’s assets, including vehicles, buildings, wells and facilities in progress, production wells and facilities as well as other right of use equipment such as the FPSOs, drill rigs and others, totaled almost $3 trillion (GYD) or US$14B.

Notably, the wells and facilities in progress and the production wells and facilities account for just over US$10B. This therefore raises the question of whether Exxon will cash out the wells and facilities to pay for an oil spill.

At previous press engagements, President of ExxonMobil Guyana Limited (EMGL), Alistair Routledge boasted of his company’s assets as a primary form of financial assurance. He said citizens should note that this is separate from the assets of the other Stabroek Block co-venturers who also have substantial assets and share any liability for response activities.

Last week Kaieteur News reported Exxon can recover costs from Guyana’s oil that exceeds the insurance provided. This is according to the 2016 Production Sharing Agreement (PSA) Guyana signed with ExxonMobil and its partners.  ExxonMobil affiliate ExxonMobil Guyana Limited is operator and holds 45% interest in the Stabroek block. Hess Guyana Exploration Ltd. holds 30% interest, and CNOOC Petroleum Guyana Limited holds 25% interest.

Annex ‘C’ Section 3 of the PSA, which addresses costs recoverable without the approval of the Minister, makes it explicit at 3.1(g) that insurance and losses can be recovered.

It states: “Insurance premium and cost incurred for insurance pursuant to Article 20 provided that if such insurance is wholly or partly placed with an Affiliated Company of the Parties comprising the Contractor, such premium and costs shall be recoverable only to the extent generally charged by competitive insurance companies other than an Affiliated Company of a Party comprising the Contractor.”

The contract continues, “Costs, losses and damages incurred to the extent not made good by insurance, are recoverable, including costs, losses or damages resulting from the indemnities in Article 2 of the Agreement, unless such costs, losses or damages have resulted solely from an act of willful misconduct or gross negligence of the Contractor.”

This means that Guyana will have to prove that an oil spill was caused by gross negligence or willful misconduct by Exxon for those costs to be borne by the company.  Cognizant of the damage that can be done by an oil spill, two Guyanese went to Court demanding an unlimited parent company guarantee, which is a signed document that legally binds Exxon to cover costs above the limited insurance.

High Court Judge, Justice Sandil Kissoon on May 3, 2023 ordered the Environmental Protection Agency, (EPA) to issue an Enforcement Notice to Exxon Mobil to ensure it provides an unlimited oil spill coverage to safeguard Guyana, but the ruling was subsequently appealed by both Exxon and the EPA. The government was later added as a party to the case, fighting against the provision of this guarantee.

While the Court of Appeal deliberates on the matter, Exxon, Hess and CNOOC have lodged a US$2B oil spill guarantee to cover damages above the insurance.  Citizens have however continued to call for full protection against an oil spill, especially since such a disaster could not only affect Guyana, but Caribbean nations as well.

Notably, the modelling results showed 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 Dominican Republic, Haiti, and Jamaica.

• annual report, Assets, ExxonMobil, oil, spill