Guyana empowered to ensure coverage of all oil spill costs beyond Exxon’s US$2B parent company guarantee – EPA Head

  • Kiana Wilburg
  • June 4, 2024
  • Articles

While an ExxonMobil-consortium in the Stabroek block has furnished Guyana with a US$2 billion parent company guarantee for oil spills, as well as a US$600 million insurance package, authorities are empowered to ensure all liabilities beyond these are covered.

This was recently noted by Head of the Environmental Protection Agency (EPA), Kemraj Parsram during his appearance on the Energy Perspectives podcast, a programme powered by the Guyana Energy Conference and Supply Chain Expo.

According to Parsram, the Environmental Protection Act is clear about full liability.

“In the words of the Act, it is ‘strict liability.’ What that means is that if you are a permit holder, you are fully responsible and fully liable for any pollution that you cause and that does not have to be proven.”

Expounding on how this translates to securitization, the EPA head said an estimate had to be arrived at, as per the conditions of the law. In this regard, the EPA reviewed guidelines used by the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) as well as authorities in the United Kingdom, USA and Canada.

Parsram said international guidelines require conducting an exercise to arrive at an estimate of the reasonable credible cost of an oil spill. This would then be used as a guide on what the parent company guarantee would be, hence US$2 billion was arrived at for the Stabroek block.

“Now please note that the US$2 billion is the floor. With increasing developments, that estimate can go up. So, it is not the ceiling, it is the floor. Now, let’s say we find the cost is more, there is a clause that says the EPA and the guarantor can negotiate fulfilling that. But irrespective, the polluter stands the full cost,” the EPA head emphasised.

He was also keen to note that the EPA requires ExxonMobil and its partners – Hess and CNOOC – to provide authorities with an annual declaration of their liquidity. This ensures that at all times, the regulator is aware that the companies can cover their liabilities.

As an added layer of protection, he said ExxonMobil and its partners are required to keep a capping stack in country. This device is critical as it stops or redirects the flow of hydrocarbons, buying engineers time to seal the well permanently. ExxonMobil is also required to maintain a subscription to another. Further to this, Parsram said inspections are done on ExxonMobil’s blowout preventers to always ensure their integrity.

On the reporting side, he said there is a requirement for environmental effects monitoring. In this regard, he said ExxonMobil must monitor the effects of its discharges and emissions on water quality and biodiversity.

Overall, he said these are some of the key mechanisms in place to protect Guyana, and which also lend to the EPA’s goal of becoming a world-class regulator.