A Guyanese court has ruled that Exxon Mobil’s (XOM.N) subsidiary failed to meet its insurance obligations for its first offshore oil project in Guyana, in part because of errors made by the environmental regulator, a decision the government has rejected.
Risk of suspension of the Liza One project
According to High Court Judge Sandil Kissoon’s ruling, Exxon attempted to dilute its obligations under its environmental permit for the Liza One project, which inaugurated oil production in Guyana in 2019. The company must provide the Guyanese authorities with a liability agreement from an insurance company by June 10 or Liza One’s environmental permit will be suspended.
Exxon already present in Guyana
Exxon, which leads a consortium that includes U.S. oil company Hess (HES.N) and China’s CNOOC (0883.HK), produces about 380,000 barrels of oil a day, the same amount of crude oil as the entire South American country. To date, the Guyana Environmental Protection Agency and the Ministry of Energy have approved five offshore oil and gas projects submitted by the group. Liza One’s environmental permit requires the provision of two forms of insurance coverage, one from the affiliate amounting to $600 million in the event of an oil spill, and a parent guarantee agreeing to cover all costs above the $600 million threshold.
