A Guyanese court recently ruled against the energy company and the country’s environmental agency.
A unit of Exxon Mobil has been ruled to be in breach of oil spill insurance for its first Guyana offshore oil project, partly because of errors made by the country’s environmental regulator, according to a Guyanese court.
The government of Guyana has rejected the ruling made by the court against its environmental regulator.
According to High Court Justice Sandil Kissoon in the ruling, Exxon “engaged in a disingenuous attempt” to shrink its environmental permit obligations for the Liza One project that launched the country’s oil production four years ago. This would place the project in breach of oil spill insurance regulations.
A consortium led by Exxon which includes the Hess oil firm from the United States and CNOOC from China has achieved a production rate of about 380,000 barrels of oil per day. This represents the entire crude output for Guyana.
The Environmental Protection Agency of Guyana and the ministry of energy have given their approval for five offshore oil and gas projects requested by the consortium.
Oil spill insurance is a requirement of the Liza One project’s environmental permit.
The environmental permit for the Liza One has two insurance requirements. The first is for $600 million for the affiliate to provide coverage in case of an oil spill. The second a parent guarantee commitment for coverage of all costs that occur beyond that $600 million coverage.
The ruling made by Kissoon states that Exxon is required to provide authorities in the country with a liability agreement from an insurer by June 10. Should that not occur, the environmental permit for the Liza One project will be suspended.
The agreement will provide oil spill insurance coverage for any damages that occur as a result of incidents.
The judge wrote in the ruling that Exxon “engaged in a course of action made permissible only by the omissions of a derelict, pliant, and submissive Environmental Protection Agency.”
“The ruling is what it is and we will comply at this time,” said an Environmental Protection Agency spokesperson.
A representative of Exxon said that the company is now reviewing the decision made by the court and is conducting an evaluation of its next steps.
