As the 30-day timeframe winds down for the implementation of Justice Sandil Kissoon’s ruling on ExxonMobil’s parent company guarantee, the US oil major yesterday said that should their appeals fail and parent companies refuse to supply one, it could lead to the halting of operations at the Liza 1 Phase 1 project in the Stabroek Block.
This could be potentially detrimental for the overall investor climate here and would see about US$350 million per month in revenue losses.
“We filed an application for that order to be stayed because we believe if we’re unable to secure, as ordered, those unlimited guarantees, then obviously the permit is suspended per that order. And then we would have to stop production on the Liza Phase 1 facility, which then has significant financial implications for all of the investors but also for the country in the sense of revenues that could be lost,” Country Manager, Alistair Routledge, yesterday told a press conference held at the company’s Duke Street Head Office in Georgetown.
Routledge contended that the ruling is in contradiction of the agreement it has with the Environmental Protection Agency (EPA), even as he stressed that not only has the company already demonstrated that it would not shun its commitments should there be a spill, but it has also shown the layers of safety measures it has taken to ensure that there are never any incidents.
Two weeks ago, Justice Sandil Kissoon delivered his ruling in a case brought by President of Transparency Institute of Guyana Inc (TIGI), Frederick Collins, together with another concerned citizen – Godfrey Whyte, which asked the court to get the EPA to enforce the liability clause in the permits it had issued to ExxonMobil.
In his ruling, Justice Kissoon said of the EPA, “It has abdicated the exclusive statutory responsibilities entrusted to it by Parliament under the Environmental Protection Act 1996 and the Environmental Protection Regulations 2000 to ensure due compliance by Esso Exploration and Production Guyana Limited [EEPGL].”
Collins and Whyte had argued through their attorneys that “…the agency, through its human minds, including its officers has failed or omitted to carry out or to show that it has carried out its legal duties and or obligations thereby amounting to misfeasance in public office by them and by failing or omitting to act, has acted unreasonably, irregularly or improperly and or has abused its power.”
Justice Kissoon had said that in the course of the proceedings, the court found on the evidence that EEPGL was engaged in a “disingenuous attempt which was calculated to deceive when it sought to dilute its liabilities and settled obligations stipulated and expressed in clear unambiguous terms at Condition 14 of the Environmental Permit (Renewed) while simultaneously optimising production at the Liza Phase 1 Petroleum Production Project in the Stabroek Block Offshore Guyana.”
Directly calling out the EPA, the judge said EEPGL “engaged in a course of action made permissible only by the omissions of a derelict, pliant and submissive Environmental Protection Agency.”
He said that the proceedings brought to the fore the adage, “But for the vigilance of citizens, society shall perish.”
EPA went to court asking for a stay of the ruling but this was not granted. In fact, Appeal Court Judge, Rishi Persaud, said that the stay will only be addressed if there is a need, since he intends to complete the matter before the June 10th deadline set by the High Court for the EPA’s compliance.
Justice Persaud made it clear that the preliminary matter to be dispensed with before him, is a narrow one, simply concerning whether the EPA appeal has prospects of succeeding.
Justice Kissoon’s decision has put ExxonMobil and the government on the back foot as non-compliance could lead to the cancellation of the environmental permit for Liza-1 and a halt to its operations.
Routledge said that while the case would only affect the Liza-1, it is unclear if the court’s further rulings could see other cases filed.
“The particular case is only on the Liza field 1 environmental permit so this only affects it, directly today, the order is only related to Liza Phase 1. There are two aspects – One is on the ruling itself; on the findings, and the other is on the order the judge issued which requires certain measures that need to be taken. If we can’t meet the order, the Liza Phase 1 would be suspended. It would only be the Liza Phase 1. It wouldn’t affect the rest of the operations in the Stabroek Block, at this time,” he said.
Stressing that the company believes that the ruling is in contradiction of the permit that it has with the Environmental Protection Agency, company officials also said that halting of the Liza 1 project would see approximate losses of over US$350 million per month from possible production.
In the meantime, he said what the company was “working on is seeing whether we can secure such a guarantee from our affiliated… or parent companies and Hess and CNOOC are also asking those questions of [their] parent companies. We don’t know whether we will be able to secure those. But that is something we are pursuing.”
He explained that ExxonMobil was “disappointed” and reasoned that a sum has to be stated.
“The forms of financial assurance shall be guided by an estimate of the sum of reasonably credible cost expenses and liabilities so an estimate should be used,” Routledge stressed as he read an excerpt from the Liza-1 Permit.
He noted too that “To have uncapped insurance only has a value up to what is available from the affiliated companies providing that insurance.”
Routledge said that the current US$600 million per well and US$2 billion parent guarantee was of global industry standards as investors want to see a sum attached to risks. “Let’s say you are going to buy a property and there is a potential liability down the road and the person you are going to sell it to says ‘I want some assurances that you will cover the liabilities. I don’t have enough monies so I go to my parents or uncles and say to them, well, give me an open ended any kind of liability assurance. Your parents or uncle are going to provide that? They will want to know what kind of exposure is there …and I think that is important also for the country,” he reasoned.
Routledge said that he could not speak on behalf of the corporation as to if it will give the parent guarantee, but noted that the case was a first where there is a dispute over permits granted, during the production phase where there are lots of revenue streams.
“It is not just a question of ExxonMobil, but Hess and CNOOC. Hess is another American company but CNOOC is Chinese and state-owned. I honestly don’t know what the probability is,” he said of all three companies reaching an agreement to have respective parent assurances.
And with government supporting the EPA and joining in the appeal against the ruling, Routledge said that it should not mean that government was siding with the company but that it [government] was concerned about future investments for this country since “ExxonMobil is used like a `weather vane’ for investors.
“We feel the government is creating an environment that is attractive to investors to come to Guyana and make those investments… and is thoughtful on how it attracts international investors to the country.”
