The Guyana government is facing criticisms of its management of the oil sector, including accusations of anti-nationalism, hot on the heels of an upset judgment by the Supreme Court. Justice Sandil Kissoon said ExxonMobil affiliate, Esso Exploration and Production Guyana Limited (EEPGL) and the Environmental Protection Agency (EPA) failed to uphold license obligations to protect Guyana in the unlikely incidence of an oil spill.
There is currently insurance for US$600 million in the event of any such polluting event from Stabroek Block operations. The assets of Exxon’s Guyana affiliate, valued somewhere around US$6-8 billion (according to government) form the second line of defense. Then, the guarantee.
The Judge made an order to compel the provision of environmental liability insurance by Exxon in keeping with industry practice to a defined standard, and an unlimited liability parent and/or affiliate guarantee in a matter of weeks.
Because the environmental regulator has moved to appeal the Supreme Court judgment, Attorney General Anil Nandlall said the government is now facing scathing criticisms. But he insists the backlash from critics has a lot to do with there being a misunderstanding about what the government intends to do.
“We are not oblivious to the dangers of an environmental disaster,” Nandlall said during a May 9 episode of his show, Issues in the News.
“It is because we are cognisant of those possibilities that we have imposed these conditionalities to protect the very people of Guyana,” Nandlall said of the aspect of Exxon’s Liza Phase 1 environmental permit about insurance. While the document indeed requires ExxonMobil to provide a parent and/or affiliate guarantee, where the government and the Supreme Court Justice differ is on whether this guarantee should be an ‘unlimited’ one. Government says there is no such thing. Nandlall explained that the manner of enforcement of the provisions is based on assessment of risk, and that risk must have a value.
In his ruling, Justice Kissoon imposed a 30-day timeline on submission of the guarantee by EEPGL. Failure to deliver would result in a cancellation of the environmental permit for ongoing crude production of 150,000 barrels per day (bpd) at Liza 1.
The EPA disagreed with this directive. In the appeal filed May 9, Executive Director, Kemraj Parsram contended that the law affords the EPA a level of discretion in carrying out its duties as a public authority. He said the court cannot direct how this discretion is to be exercised.
Exxon reviewing Guyana court ruling, says insurance exceeds industry benchmarks
The regulator has been in talks with Exxon for the past two years on a guarantee valued at US$2 billion. Vice President Dr. Bharrat Jagdeo indicated recently that negotiations over the guarantee would soon come to a close. Exxon said in a post-ruling statement that the Stabroek Block co-venturers have adequate and appropriate insurance and proposed guarantees in an amount that exceeds industry precedents and an estimate of potential liability.
“We all want [the guarantee],” Jagdeo said during a May 4 press conference, “but we also can’t be shrill and capricious in our dealings, in our discussions, particularly at the level of our regulatory agencies, to get that outcome. We have to pursue diligently, professionally, that outcome, which is to get, as a country… insurance coverage that will meet all the circumstances should we have an adverse event offshore.”
He also remarked that Guyana is playing in the big leagues now. “We’re not a backwater country where you can do what you want and get away with it… Our institutions should not be engaged in economic nationalism.”
Both Jagdeo and Nandlall argued, as the oil sector is singlehandedly driving Guyana’s economy into an unprecedented new age, that it is important to protect the permit from cancellation.
The first hearing of the appeal is scheduled for May 11.
