On Tuesday, a New York (NY) judge cleared energy giant ExxonMobil of alleged securities fraud involving climate change regulations risk in a closely watched case that fatally weakened over the years.
Manhattan Supreme Court Justice Barry Ostrager ruled the state failed to prove “by a preponderance of the evidence” that the firm “made any material misstatements or omissions about its practices and procedures that misled any reasonable investor,” in violation of the Martin Act, an expansive law that does not require proof of intent of shareholder fraud.
He agreed that ExxonMobil’s “proxy cost” of up to US$80 per tonne of carbon dioxide emissions projected by 2040, and internal greenhouse gas estimates of half or less that amount, were distinct and “different metrics.” The lawsuit by the office of State Attorney General Letitia James unsuccessfully argued that ExxonMobil (XOM) caused investors to lose up to US$1.6 billion by falsely claiming it had properly evaluated the impact of future climate regulations on business.
In a separate but equally striking story, lost among the big international headlines, the news agency, Reuters reported that Exxon and fellow American partner, Hess, will export Guyana’s first-ever shipments of crude oil in early 2020.
Quoting unnamed but knowledgeable sources, Reuters said XOM is planning on shipping two 1-million-barrel cargoes of Liza crude in January, to be followed by similarly sized shipments from Hess and lastly the Guyana’s government in February.
This means the historic first commercial oil will be pumped earlier than planned from the Liza-1 deep-water well, mere weeks before the country’s upcoming general elections. While “first oil” is raising understandable excitement that a century-old quest is finally being realised, there is also a mounting sense of dread, and endless questions about how well prepared we really are, as an inexperienced newcomer, to deal with a high-powered corporate colossus and the notoriously complex and often corrupt world of petroleum business and Big Oil.
Yet the national stakes are particularly high given the expected record earnings over years and the coveted political power to wield that unprecedented purse for long-awaited development. We are reminded, almost daily, that the very resources slated to bring low-lying, needy Guyana unexpected wealth will contribute to its increasing vulnerability. The world’s finest scientists agree the burning of non-renewable fossil fuels, such as oil, releases carbon dioxide into the atmosphere, altering the Earth’s climate and pushing us closer to environmental peril.
As Justice Ostrager wrote in his scathing 55-page ruling, “ExxonMobil does not dispute either that its operations produce greenhouse gases or that greenhouse gases contribute to climate change. But ExxonMobil is in the business of producing energy, and this is a securities fraud case, not a climate change case.”
Announced in May 2015, the Liza discovery in the lucrative Stabroek Block was the first of 14 such significant oil finds about 120 miles offshore Guyana by the XOM-led consortium. It encountered more than 295 feet of high-quality oil-bearing sandstone reservoirs and was safely drilled to nearly 18,000 feet in some 5,700 feet of water. The company’s affiliate, Esso Exploration and Production Guyana Limited (EEPGL), enjoys 45 per cent interest in the huge 6.6 million acres concession, while Hess Guyana Exploration Ltd has 30 per cent, and China’s National Offshore Oil Corporation (CNOOC), 25 per cent interest through its CNOOC Petroleum Guyana Limited.
“Those finds are turning Guyana, an impoverished nation bordering longtime producers Venezuela and Brazil, into a hot property for oil investment,” Reuters acknowledged. Quoting a local spokeswoman that “key activities” on the Stabroek block, including early production, were running ahead of schedule, the agency repeated that the coming weeks would be critical, given weather and other factors.
Last month, XOM’s partner Hess announced that the timetable for production of first oil had moved up to this month. Bearing the trademark five colours of the Golden Arrowhead, the flagship “Liza Destiny” or FPSO Floating Production Storage and Offloading (FPSO) vessel will bring up 120,000 barrels per day (bpd) of oil, reaching 750,000 bpd by 2025. It was converted at a Singapore shipyard from the Bahamas-flagged “Tina” Very Large Crude Carrier (VLCC) and has the storage capacity of up to 1.6 million barrels.
Liza will be the first Guyanese crude grade produced and offered to the international oil market. Liza crude has “32 API degrees of density and 0.5 per cent of sulphur (sulphur) content, according to Exxon’s assay seen by Reuters.” API gravity is a commonly used index of the density of a crude oil or refined products. API stands for the American Petroleum Institute, the industry organisation that created this measure.
Reuters added that, “Exxon plans to process the oil at its refineries, while Hess could offer it for spot sales. CNOOC, which has not yet scheduled exports, would ship it to China, whose refiners like using similar medium sweet grades.”
A crude oil will typically have an API between 15 and 45 degrees. Higher API indicates a lighter or lower density crude while lower API shows a heavier or denser crude. Generally, lighter or high API crudes like Brent in the 35-45 API range are more valuable because they yield pricier products when run through a refinery, the American management consulting entity McKinsey and Company explained on its website.
The most common characteristics to identify the quality of a crude are its API gravity and its sulphur content. The highest valued crude grades are typically those with high API gravity and low sulphur, known as “light-sweet crudes.” At the opposite end of the spectrum are the grades with low API gravity and high sulphur, referred to as “heavy-sour crudes.”
In refining, a crude oil grade like Guyana’s is called sweet for its low sulphur. A sweet crude would be under 1% sulphur content, by weight. Crude oil comes in hundreds of different varieties or “grades,” valued differently by refiners.
Crudes lighter than 45 are considered extra-light crude or condensates and are valued lower because they contain a lot of “light ends,” such as propane and butane. A medium crude is in the 25-35 API range, and a heavy crude is in the 15-25 API range. Anything below 15 API would be considered an extra-heavy crude.
“Interested buyers are exploring options to co-load Liza crude with other South American crudes bound for Asia, mainly Brazilian grades. Starting in March, very large crude carriers (VLCCs) could lift up to 2 million barrels each, depending on weather conditions,” Reuters revealed.
“We are expecting Liza to be traded at US$4-US$6 over Brent crude prices during the first three months of exports. First buyers would test it, and then prices could go up a little,” a trader interested in purchases told the news group.
Guyana is at a critical juncture in its mottled history. Even with the controversial, lop-sided 1999 contract with ExxonMobil, featuring a low two per cent royalty on gross earnings and 50 per cent of oil proceeds, at the current average market price of US$50 per barrel, we could earn US$1 million a day.
Now, more than ever, we need to accept the “sweet” and quickly deal with the “sour,” working to set aside long simmering ethnic mistrust and endless bickering, heightened by the surprise passage of the Charrandass Persaud-backed no-confidence motion against the Government late last December. In this critical year before first oil, the bitter truth is that it has also further divided and distracted us from dealing with a range of related issues since Parliament remains non-functional.
ID echoes the Guyanese saying, “If meh bin know, always deh behind di door.” In other words, it is too easy to use ignorance as a sorry excuse for mistakes.
