This article is about the Payara Development Project in Guyana.
The Payara Development Project in Guyana is the third offshore oilfield project located in the Stabroek Block, located approximately 102.27 nautical miles from the Coast of Guyana.
Despite facing various legal challenges surrounding liabilities in the event of an oil spill, the Payara development project remains set to start oil production in 2024, as originally scheduled.
Offshore work for the project continues to progress, according to the latest updates provided by the project operator earlier this month.
Offshore Developmental Activities in Payara
On May 13, 2023, Esso Exploration and Production Guyana Limited (EEPGL) announced that they are continuing to press on with offshore works in the Stabroek Block of Guyana’s Exclusive Economic Zone (EEZ).
The company noted that the developmental activities should finish on July 5, 2023. During the offshore exercises, they plan to include the use of OSV Delta Commander.
EEPGL — a subsidiary of Exxon Mobil — is the operator of the Payara development project. It is also the majority stakeholder in the Stabroek Block. Other notable stakeholders in the area are Hess Guyana Exploration and CNOOC Petroleum Guyana, a subsidiary of China National Offshore Oil Corporation.
Arrival of FPSO Prosperity
Another project update announced by ExxonMobil Guyana is the arrival of the Prosperity, a Floating Production Storage and Offloading (FPSO) vessel. The vessel was constructed by SBM Offshore, a well-established Dutch ship builder.
The Prosperity was designed to hold a total of two million oil barrels. During the Payara project’s initial phase, the vessel is expected to produce approximately 220,000 barrels of oil per day.
This FPSO will be the third such ship operating in the Stabroek Block. The first two are the Liza Destiny and Liza Unity, which first started operations in December 2019 and February 2022, respectively. The two vessels already produce over 380,000 barrels of oil per day combined.
Upon the start of the Prosperity’s operations in 2024, it is set to help push the expected daily production to around 600,000 barrels per day — further boosting the nation’s daily oil production. According to the company, installation campaigns are already ongoing, as well as developmental drilling, in order to ensure Prosperity's start-up in late 2023.
Potential Issues With Liability Coverage
Despite the continued preparations for increased production, Guyana has still yet to secure full liability coverage. This liability coverage is meant to cover any and all expenses associated with potential oil spills — from cleanups to other legal challenges.
As of writing, the project developer EEPGL has only provided an assurance of $600 million per oil event. However, many experts have noted that the amount is highly insufficient in the event of a massive oil spill in the Stabroek Block.
Based on past oil spills in other parts of the world, the liability coverage reached billions of dollars. This covered not only the costs of cleanups but also the settlements and costs to help compensate citizens who mounted legal cases against the oil operators after losing their livelihoods.
ExxonMobil has been requested to provide a parent company guarantee for the Stabroek Block offshore oil operations. It is currently in the middle of litigation procedures before local Guyana courts.
EEPGL Court of Appeal Hearing
The Environmental Protection Agency (EPA) had previously filed an appeal, challenging the High Court order for the agency to order EEPGL’s parent company to provide a guarantee for the aforementioned offshore oil operations in case of an oil spill.
This was following issuance of the May 3 court order that directs the EPA to issue an enforcement notice to EEPGL, and by extension, ExxonMobil, its parent company. Justice Sandil Kissoon had ordered the agency to ensure that both parties provide an unlimited parent company guarantee by June 10, as part of an assurance to help protect Guyana against the adverse effects of potential oil spills.
The EPA filed an appeal on the basis of incorrect interpretation. They are arguing that the trial court substituted its own discretion and wrongly interpreted Clause 14 of the Environmental Permit issued to EEPGL.
The agency notes that the trial court incorrectly concluded that EEPGL must be the one to provide financial assurance. The EPA also contends that the trial court erred in its interpretation of the Environmental Protection Act, its regulations, and the exercise of EPA’s discretion.
They are seeking a stay of execution on the basis that it would potentially bring irreparable harm to the nation’s economy.
As a result, the Court of Appeals intends to apply the merit test to the EPA appeal. The appeal was scheduled for May 29, Monday, at 10:00 AM, during which Justice of Appeal Rishi Persaud was supposed to hear arguments from both sides. The ruling is scheduled to be brought down before June 10, which is also the last day to comply with Justice Kissoon’s order.
However, the oral arguments regarding the EPA appeal were postponed due to the absence of Sanjeev Datadin, the counsel for the EPA. Justice of Appeal Persaud noted that as per an email he received from Datadin, the EPA counsel was unable to return to Guyana on Sunday night as originally scheduled due to flight difficulties.
Guyana’s Payara development project progresses at a steady pace. As its offshore activities continue, and the FPSO Prosperity finally arrives, the project is expected to meet its intended operation start by 2024.
However, challenges still remain — not on the operations side but in legal matters, particularly surrounding liability coverage for oil spills. These still need to be addressed in court. As the Court of Appeals examines the merits of the EPA’s appeal, the outcome of these proceedings can have significant implications for Guyana’s energy sector, as well as the nation’s environment and overall economy.
This article was about the Payara Development Project in Guyana.
By Melissa D. Goolsarran Ramnauth, Esq. | This content is copyright of West Indian Diplomacy, LLC and may not be reproduced without permission.
She runs West Indian Diplomacy, a Caribbean blog aimed at promoting West Indian history and business in the global marketplace.
Melissa has been an attorney for over 10 years. She currently focuses on trademark registration, trademark searches, and office actions. She also has extensive legal experience in the areas of trademarks, copyrights, contracts, and business formations. She owns her own Trademark Law Firm that is virtually based out of Fort Lauderdale.
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