On Friday, ExxonMobil issued a terse statement on its offshore oil extraction operations notifying that it had had to resume gas flaring above pilot levels because of a defective seal.
The US oil major stated that “There was a technical issue regarding a seal on the gas compressor on Liza Destiny. This unfortunate incident resulted in us having to temporarily increase our flare above pilot levels in order to maintain safe operations”.
It then quoted Alistair Routledge, President of ExxonMobil Guyana as stating “We are disappointed that this unexpected issue has occurred and we’re working diligently with the vessel’s owner and the equipment vendor to understand and fix the issue as quickly as possible”.
Exxon then went on to say that the relevant government authorities have been informed and are being provided with regular updates.
There are two matters of immediate concern. The first is that Exxon provided notification of the problem to the public when this really should have come from the Guyana Government. Government officials seemed to have been caught unawares. There was no word on Friday from the regulatory authorities including the Environmental Protection Agency (EPA). It has been argued before that the Guyana Government should have full-time representation aboard the Floating Production, Storage and Offloading platform in relation to two particular areas: immediate notification of any serious problem in the extraction operation and to verify the volumes of crude being withdrawn.
The second matter of immediate concern is the clear statement from Exxon that gas flaring had to resume above pilot levels “in order to maintain safe operations”. In other words if flaring was not restarted, operations would have become unsafe. This is of great concern.
Exxon’s subsidiary and its partners have been extracting oil offshore for more than a year. At what point, considering its production and environmental permits, does the Government of Guyana and/or its regulatory body say to Exxon that the preferred option in the interest of safety is an immediate and significant reduction in oil extraction rather than the environmentally polluting flaring?
As has been frequently warned before, the worst case scenario for Guyana and its neighbours would be a well blowout in the Atlantic. This must be robustly guarded against. However neither the government nor its regulatory agencies inspire confidence that they have established the requisite oversight and are prepared to hold Exxon and its partners accountable.
The truth is that Exxon wants to extract oil at breakneck speed to take advantage of low production costs in the Liza-1 field. In equal measure, the Guyana Government wants to harvest as much revenue as possible to fuel its expenditure ambitions. Together these outlooks pose a regulatory nightmare as the culture of unrestrained extraction will see less emphasis on environmental safeguards.
The clearest statement about Exxon’s intention to push the envelope on Liza-1 came from its bubbly partner Hess, which at an earnings call last week playing up the attributes of the well, disclosed that production has gone over the inscribed capacity of 120,000 barrels per day and this would continue.
President and Chief Operating Officer of Hess, Greg Hill noted in the earnings call that it was in mid-December that the Liza Destiny achieved its nameplate capacity of 120,000 gross barrels of oil equivalent per day.
He then went on to add: “And since then (Liza Destiny) has been operating at that level or higher. During 2021, the operator intends to evaluate and pursue options to increase nameplate capacity. For 2021, we forecast net production from Guyana will average approximately 30,000 barrels of oil per day with planned maintenance and optimization downtime being broadly offset by an increase in nameplate capacity”.
Has the Government of Guyana and its regulatory authorities sanctioned an expansion of nameplate capacity for Liza-1?
In a comment to Stabroek News on Friday, the former Director of the EPA, Vincent Adams, who had clearly been sacked by the PPP/C government as he was seen to be taking a tougher line on ExxonMobil, said he had warned about production levels.
Mr Adams told Stabroek News that he had cautioned against allowing the maximum production rate and advised that a plan be devised to “keep stability in the reservoir.”
“They should not continue producing at maximum and production should have gone to minimum to keep stability in the reservoir. If they are flaring with those production rates, that is a whole lot of flaring,” he added.
ExxonMobil has been able to get away with an entire year of flaring of gas without suitable penalties or attachments to its permits. This state of affairs must no longer be permitted particularly since it is speeding headlong into production from two other platforms next year and in 2024 and is already eying others.
As also highlighted by Mr Adams, Exxon’s inability to rectify gas compression problems with this well is baffling and requires closer examination. The PPP/C government must take seriously its responsibility to protect the environment and mitigate any risk to the country from Exxon’s operations. The ongoing problems with gas compression on the Liza Destiny and the expressed intention to go above nameplate capacity warrant immediate intervention.
At this stage, the government must do two things. It must have Exxon cut production to safe levels and to ensure no flaring above pilot levels is occurring. It must also seek an immediate and independent assessment of the current problems on the Liza Destiny so it would be in a better position to determine what longer-term action should be taken. Anything less than that would constitute dereliction of duty in ensuring safe operations offshore.
