(Reuters) – An Exxon Mobil unit is in breach of insurance obligations for its first offshore oil project in Guyana, partly because of errors by the environmental regulator, a Guyana court ruled on Wednesday, a decision the government rejected.
Exxon “engaged in a disingenuous attempt” to dilute its obligations under its environmental permit for Liza One, the project that inaugurated Guyana’s oil production in 2019, Supreme Court Justice Sandil Kissoon said in the ruling.
An Exxon-led consortium that includes US oil company Hess Corp. and China’s CNOOC produces about 380,000 barrels of oil per day – the South American nation’s entire crude output.
Guyana̵7;s Environmental Protection Authority and the Ministry of Energy have so far approved five offshore oil and gas projects put forward by the group.
Liza One’s environmental permit requires the provision of two forms of insurance coverage, one from the subsidiary that stands at $600 million in the event of an oil spill, and a parent guarantee that commits to cover all costs above the $600 million threshold.
According to Judge Kissoon’s ruling, Exxon must provide the Guyanese authorities with a liability agreement from an insurance company by June 10 or the Liza One environmental permit will be revoked. The agreement would cover potential damages from incidents including spills.
The company “engaged in an act permitted only by the omissions of an abandoned, compliant and submissive environmental protection agency,” the judge wrote.
“The decision is what it is and we will abide by it at this time,” an EPA spokesperson said.
Exxon is reviewing the court order and evaluating next steps, a company spokesman said.
The government said the judge breached his statutory duty by failing to enforce compliance by Esso Exploration and Production Guyana Ltd., and that “the judge erred in his findings.”
The sentence will be appealed and it is requested to postpone the sentence, says the government in a statement.