IEEFA: ExxonMobil benefits from loophole requiring Guyana to pay for costs of decommissioning wells
New report shows ExxonMobil will receive $3.2 billion for decommissioning costs
May 26, 2022 (IEEFA) – ExxonMobil is going against industry standards in Guyana by receiving $3.2 billion for decommissioning costs that is not required to be set aside for decommission and clean-up in the country, according to the latest report by the Institute for Energy Economics and Financial Analysis.
The IEEFA analysis finds ExxonMobil continues to benefit from a system that requires Guyana to pay for costs of decommissioning wells in advance with no oversight of the company.
ExxonMobil and its oil partners have a real opportunity to pocket millions—if not billions—with no accountability. If they take the money, sell the project before the wells are decommissioned and pass the liability onto a weaker company, Guyana’s taxpayers could be left footing the bill.
“This is yet another example of Guyana being shortchanged under its existing petroleum agreement with ExxonMobil, Hess, and the Chinese National Offshore Oil Company,” said Tom Sanzillo, IEEFA’s director of financial analysis and author of the report. “With no provision to ensure the money paid upfront will be available in 20 years, there is a real chance the taxpayers of Guyana could be left footing the bill.”
This report is the fourth in a series issued by IEEFA covering selected topics of concern related to the 2016 petroleum agreement between the government of Guyana and ExxonMobil, Hess and CNOOC for an offshore oil drilling project located in the Liza field, which is comprised of Liza 1,2,3 and Payara.
ExxonMobil and its partners benefit from a system that requires Guyana to pay for costs of decommissioning in advance installments starting from the beginning of the contract. Guyana then relies on the companies to pay for the decommissioning 20 years later. Industry practice establishes that a trust account should be set up for such a fossil fuel drilling and extraction project. The trust account can only be used to pay for the abandonment costs when they occur. However, Guyana’s agreement does not require that a trust account be established.
“ExxonMobil stands to make millions if not billions from this arrangement,” said Sanzillo. “Additional disclosures about decommissioning would benefit the people of Guyana.”
Full Report: Clean-up costs for wells in Guyana, another loophole to benefit ExxonMobil and partners
