Dear Editor,
I found Dr. Vincent Adams’s assertion startling and unbelievably naive (S.N. 29.1.24) “…the Guarantee costs nothing. It is merely a paper Guaranteeing that parent company Exxon and its partners Hess and CNOOC will provide Full Liability Coverage to cover all costs above the insurance coverage, regardless of the amount of insurance. Simply put: Full Liability Coverage = Insurance + Parent Company Guarantee” (sic). If only things in the business world were as simple as Adams asserts in his fantasies. I have seen others make similar assertions but Dr. Adams was the head of Guyana’s EPA and a reality check is in order.
ExxonMobil (XOM) is one of the world’s largest publicly traded oil and gas companies, has 62,000 employees, and is organized around 3 areas of activity: Refining and Distribution (78.8% of net sales): Petrochemical (13.3%): Explora-tion and Production of hydrocarbons (7.9%; worldwide leader). XOM is governed by a Board of Directors which is answerable to the shareholders; Institu-tional investors hold a majority ownership of XOM through the 61.26% of the outstanding shares that they control. ExxonMobil’s 12-month revenue was US$285.6 billion for FY 2021 with a net profit of US$23 billion. The company’s market capitalisation was about US$360 billion as of March 2022. All of this financial information would be trotted out by lawyers in the event of a spill and put at risk with an ‘unlimited parent company guarantee’ or what Vincent Adams calls “merely a paper” because what he (Adams) fails to appreciate is that over 70% of oil spill costs go to compensating people and businesses affected by the spill, less than 20% is spent on actual cleanup. The lawyers, environmental activists, and every unscrupulous opportunist would attack that ‘unlimited guarantee’ until XOM was bled dry. It would be a very foolish executive who entertains any such guarantee suggestion and it would certainly not fly with a board charged with protection of the billions of dollars invested by the shareholders.
In the business world, things are quantified, planning is done based on multiple ‘doomsday’ models and a worst-case costing is assumed as the total risk; putting pen to paper to pledge ‘unlimited’ funds is akin to ‘chumming’ the ocean while you are swimming, the sharks are the only winners in that scenario. We have already seen a Judge in Guyana demand ‘unlimited’ insurance; imagine if that had been a claim for damages! XOM cannot risk its entire existence for such a small part of its overall business, there will be no unlimited parent company guarantee, nor is one required to cap and clean up in the event of an oil spill. XOM owns an insurance company and could easily produce a trillion-dollar policy and stick the premium payments under the ‘cost oil’ expenses if they wanted to stick it to us! Instead, XOM has wisely used scientific modeling and data to keep premiums and costs down despite pressure from locals who would have us throw millions away to prove an unnecessary point. That is the reality and Guyanese have to cast aside the naiveté of Adams and Co. when dealing with the business world if we are to continue to be an ‘oil-producing nation’ and reap all ensuing benefits.
Sincerely
Robin Singh
