Private Sector Commission welcomes anti-spill, financial safeguards for Yellowtail

Last Updated on Saturday, 2 April 2022, 21:39 by Denis Chabrol

The Private Sector Commission (PSC) on Saturday said it was satisfied that the environmental authorisation of the Yellowtail oil production project requires the ExxonMobil-led consortium to have emergency equipment in Guyana to cap a well should there be a blowout at the offshore project.

“The PSC is pleased with the Oil Spill Response and Financial Assurance provision in the permit which requires EEPGL (Esso Exploration and Production Guyana Limited) to procure a Capping Stack to be maintained, tested and stored in Guyana as this will ensure that operators are in a state of readiness to cap any well in the event of a disaster,” the PSC said.

Guyana’s Environmental Protection Agency (EPA) explained, in announcing the grant of its Environmental Authorisation for Yellowtail, that among the notable conditions, the Permit requires EEPGL to procure a Capping Stack to be maintained, tested, and stored in Guyana.” The EPA explained that a capping stack is a large well closure device that connects to the top of the blowout preventer (BOP) and is capable of sealing off a well.

Additionally, the EPA said EEPGL must maintain access to at least one overseas subscription service, to allow mobilization of a Capping Stack to the project location. This serves to fortify safety and emergency response efforts since wells would be swiftly capped in the event of a well blow-out.

The PSC also expressed satisfaction that that flaring has been incorporated into the Yellowtail permit with specific detail, but urged EEPGL to have spare equipment on standby should there be a malfunction and so avoid gaseous pollution. “We would also like to see an effective Contingency Plan put in place  (such as having a spare compressor on hand) to address any mechanical failure that may occur in
the future that will limit flaring to the approved limits as specified in the permit,” the private sector body said.

The umbrella business organisation also welcomed the undisclosed financial assurance by the ExxonMobil majority-owned EEPGL to fund the damage, cleanup and restoration as a result of an oil spill.  “Further, the Commission appreciates the fact that the Financial Assurance provision holds EEPGL liable for all costs associated with clean up, restoration and compensation for any pollution damage which may occur as consequence of the Yellowtail Development Project,” the PSC said.

The EPA and EEPGL are expected to ink an agreement to cover the financial assurance by EEPGL after the company provides an estimate of response, cleanup, restoration and compensation should there be disaster in the Stabroek Block, an official said Saturday. EEPGL, according to the official, was yet to say how much insurance would taken out for the Yellowtail project, as each project has to be insured separately.

As far as the financial assurance is concerned, ExxonMobil estimates that EEPGL is valued about US$5 billion, while their parent companies are in the hundreds of billions of US dollars.  The official said EPA hoped to finalise insurance and assurance matters with EEPGL very soon ahead of the commencement of undersea preparatory work for the arrival of another Floating Production, Storage and Offloading (FPSO) vessel.

The EPA said the Permit also ensures that EEPGL is held liable for all costs associated with clean up, restoration and compensation for any pollution damage which may occur as consequence of the project. EEPGL is also required to have Financial Assurance which includes a combination of Insurance which must “cover well control, and/or clean up and third-party liability on terms that are market standard for the type of coverage”, and a Parent Company/Affiliate      Guarantee      Agreement      which     indemnifies      and keeps indemnified the EPA and the Government of Guyana in the event EEPGL and its co-Venturers fail to meet their environmental obligations under the Permit. “Further, the financial assurance provided must be guided by an estimate of the sum of the reasonably credible costs, expenses, and liabilities that may arise from any breaches of this permit. Liabilities are considered to include costs associated with responding to an incident, clean-up and remediation and monitoring,” the EPA added.

In seeking to ensure EEPGL meets its obligations to prevent and mitigate environmental harm, the Permit imposes comprehensive requirements for monitoring and management of any impacts affecting biological, physical, and socio-economic resources within the Area of Influence of the project, including targeted and updated environmental baseline studies. The Permit also requires EEPGL to submit safety case information, including a risk assessment prior to drilling and development of wells, according to the EPA.

The Yellowtail Development will be located 203 kilometres north-east off the coast of Georgetown, Guyana to a water depth in the project area ranging from 1,700 metres to 1,900 metres.

Yellowtail-1 well encountered 89 metres of oil-bearing sandstone reservoir and Yellowtail-2 well encountered 21 metres of net pay in newly identified oil-bearing reservoirs among the original Yellowtail-1 intervals.