OGGN requests the GoG to secure and publish the production machinery stress test certificates

Be Transparent

The oil companies, Hess & Exxon, recently reported earnings in the 2Q2023 that were significantly below the profits they earned in 2Q last year. However, they were very optimistic about the future because of their big bet on Guyana. By 2027, they are projecting to be pumping 1.2 million barrels of oil per day. With the oil companies currently taking 85.5% of revenues, they can’t help but gloat to their shareholders and financial analysts about Guyana. Hess said by 2027 the cash unit cost for barrel would be US$10/barrel. If prices hover around the current US$83/barrel, then that would be a massive windfall for the oil companies. Thus, in 2027, the oil companies would walk away with US$26.7 billion in cash profits while Guyana would earn US$5.3 billion on its oil. The oil companies have a sweet deal given Guyana would bear the majority of the risks in a massive oil spill.     

The Oil and Gas Governance Network (OGGN) [again] suggests that the euphoria of the Hess Corporation should be tempered for the environmental security of Guyana and its friends and neighbours at risk in the Caribbean Islands.  On the 2Q2023 Hess earnings call, the company said, “Guyana keeps getting bigger and better”. Hess applauded the continued increase in daily production of oil by the two Floating Production Storage and Offloading vessels (FPSOs).  According to the Environmental Impact Assessments drafted by the consultancy Environmental Resources Management Inc. for EEPGL (Exxon’s subsidiary), the safe working level for the Liza Destiny was 120 Kbpd (120,000 barrels of oil per day).  Liza Destiny is now producing at 150 Kbpd according to Hess, and even higher, according to the website of the Government of Guyana (https://petroleum.gov.gy/data-visualization).  The second FPSO Liza Unity is rated at 220 Kbpd but is also producing an additional 30 Kbpd or more.  So together the two FPSOs are 60 Kbpd over the nameplate production levels, at a combined level of around 400 Kbpd.      

It is industry practice for the suppliers of components of complex machinery to provide certificates of assurance that the components will perform as advertised, up to safe working and maximum levels.  OGGN is almost certain that the suppliers of components to FPSO constructor SBM Offshore at Keppel shipyard in Singapore have provided such certificates, and that SBM has had such certificates independently audited by qualified risk assessors.  Likewise, the parent company ExxonMobil Corporation would have required overall certificates from SBM for each FPSO as a whole.

Given the reluctance of the EEPGL-Hess-CNOOC consortium to provide the parent company letters of guarantee for complete liability coverage which are required by the EPA environmental permits, OGGN requests the Government of Guyana to secure and publish the certificates from stress tests conducted at the Keppel shipyard in Singapore or elsewhere.  These certificates should demonstrate that continuous production at 400 Kbpd has been audited as safe by accredited industrial risk assessors.   Even in Guyana, the cars and trucks and other vehicles have to obtain an annual police clearance certificate for safe operation.  It is surely obvious, logical and prudent to require the oil majors to supply similar certificates from independent auditors for the vastly more complex and more risky oil production vessels.      

When Exxon makes questionable statements, see article titled, “ExxonMobil argues that shareholders should reject resolution #10 because it contains dubious claims” on the www.OGGN.org website (https://www.oggn.org/2023/05/28/exxonmobil-argues-that-shareholders-should-reject-resolution-10-because-it-contains-dubious-claims/), shouldn’t this raise warning flags in the Caribbean island economies which could be dramatically and severely affected by oil spills, as warned about in the individual EIAs and the cumulative impact assessment for 35 wells (https://epaguyana.org/download/ 35-multiwell-eia-of-cumlative-effects_march-2023/)?  

  It has been shown during Justice Sandil Kissoon’s ruling that Guyana did not have any valid insurance to protect against an oil spill. After Kissoon’s ruling, EEPGL obtained a US$2 billion affiliate company guarantee for oil spills. But this US$2 billion is less than 2% of the US$145 billion that the Gulf of Mexico oil spill was projected to cost. Guyana and its neighbours are currently exposed to bankruptcy from a massive oil spill without a parent company guarantee. The parent oil companies would keep their earnings in such a disaster because subsidiary earnings flow back to the parent company, not their liabilities. Hence, the Government of Guyana should be diligent in ensuring that the equipment used at Liza 1 and Liza 2 are certified for the current level of oil production.  

Sincerely,

Darsh Khusial

Alfred Bhulai

Andre Brandli

Janette Bulkan

Kenrick Hunte

Mike Persaud

On behalf of OGGN a 501(c)(3)

organization

Article Originally Published At: https://www.stabroeknews.com/2023/08/05/opinion/letters/oggn-requests-the-gog-to-secure-and-publish-the-production-machinery-stress-test-certificates/