As thousands of Guyanese struggle to cope with weeks of widespread flooding and the extensive losses of crops, livestock and livelihoods in the midst of the COVID-19 pandemic, the American energy titan, ExxonMobil (XOM) ironically announced its 20th oil and gas discovery offshore.
Moving ahead with developing the rich Stabroek block, a prized high value asset, ExxonMobil did not bother to even specify yesterday, how much this find at Longtail-3, like the previous at the Uaru-2 well in April, would add to the earlier gross discovered recoverable resource estimate of well over 9 billion barrels of oil and gas, drawn from the deep Atlantic Ocean waters of this poor country turned petro-state.
If the Irving-Texas behemoth appeared even more preoccupied and reticent than usual, it may be understandable given that the Longtail news followed days after a tiny American activist investor hedge fund, Engine No. 1 with only 0.02 percent of XOM’s shares, shook up the corporate world, by securing the installation of three dissident directors from a nominated four, on the 12-member closed-club board of ExxonMobil.
Upset by ExxonMobil’s sloth in responding to climate change risks, heavy spending and years of weak financial returns, the shock vote at the May 26-annual shareholders meeting came with the critical support of the super major’s biggest institutional investors, BlackRock the world’s largest fund manager; Vanguard and State Street which together hold a powerful one fifth stake.
The billionaire boss of Black Rock, Chairman Laurence D. Fink, in his 2021 annual letter to fellow CEOs had earlier warned, “No issue ranks higher than climate change on our clients’ lists of priorities. They ask us about it nearly every day.”
“In the past year, people have seen the mounting physical toll of climate change in fires, droughts, flooding and hurricanes. They have begun to see the direct financial impact as energy companies take billions in climate-related write-downs on stranded assets and regulators focus on climate risk in the global financial system. They are also increasingly focused on the significant economic opportunity that the transition will create, as well as how to execute it in a just and fair manner,” he said in his note.
Terming the pandemic, “an existential crisis” and “a stark reminder of our fragility” Mr Fink argued “that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives. It has reminded us how the biggest crises, whether medical or environmental, demand a global and ambitious response.”
With its densely-populated low-lying coastland, Guyana is also in “an existential crisis” and the fight of its life as Mother Nature strikes back. We are reminded daily, that the very energy resources slated to bring this needy state some financial relief, will contribute to its increasing vulnerability. The burning of non-renewable fossil fuels releases carbon dioxide into the atmosphere, altering the Earth’s climate and pushing us ever closer to permanent environmental peril.
Even with the valiant efforts of the Civil Defence Commission, the country is unable to cope. Yesterday, the Commission advised that the countrywide flooding is now a Level 2 Disaster, with President Dr Irfaan Ali making the disclosure as he addressed residents of Chesney New Housing Scheme during an ongoing outreach in Regions Five and Six.
“The CDC advised this morning that the disaster is a Level 2 Disaster so that we can now move the situation to the international community to get international support,” he said.
In an earlier message, he had acknowledged, “Many of our brothers and sisters across Guyana are faced with the worst disaster we have ever had, or they have ever had, in the history of our country.”
“This is going to take some doing to recover from; mining camps are empty, infrastructure in some instances, completely destroyed. Seeing it first hand gives you the full extent of the gravity of the situation that you’re faced with right now,” the President admitted.
According to the Caribbean Disaster Emergency Management Agency’s (CDEMA) Regional Response Mechanism, a Level 2 Event is one in which the national capacity to respond is not overwhelmed, but some external assistance is required. The affected State may or may not declare a disaster. In this scenario, the CDEMA Coordinating Unit may provide technical assistance, specialised equipment, support personnel and information sharing. A Level 3 Event overwhelms the capacity of an affected State to respond.
As many as 25,000 households are affected by the flooding which started since mid-May with more than 300 communities across all regions hard hit. Recent estimates suggest between 7,000 and 8,000 homes have been damaged and figures could run into billions with the losses of crops and livestock.
Yet Mr Fink pointed out that 2020 was a historic year of climate change commitments by corporations, governments, and investors alike. These commitments centred on achieving “net zero,” or building economies that emit no more carbon dioxide than it removes from the atmosphere by 2050, the scientifically-established threshold necessary to keep global warming well below 2ºC.
The past year saw major net zero commitments by China, the European Union, Japan, and South Korea, while the United States rejoined the Paris Agreement, he said. “More and more financial regulators are making climate risk disclosure mandatory, central banks are stress testing for climate risk, and policymakers around the world are collaborating to achieve common climate goals. 127 governments – responsible for more than 60% of the world’s emissions – and over 1,100 companies are considering or already implementing net zero commitments,” Mr Fink noted.
“These changes will have dramatic impacts for investors. Last year, we wrote that investors were increasingly recognizing that climate risk is investment risk, which would drive a significant reallocation of capital.”
But is ExxonMobil listening? “Longtail-3, combined with our recent discovery at Uaru-2, has the potential to increase our resource estimate within the Stabroek block, demonstrating further growth of this world-class resource and our high-potential development opportunities offshore Guyana,” boasted Mike Cousins, Senior Vice President of Exploration and New Ventures at ExxonMobil.
A week ago, ExxonMobil handed over a flood relief cheque for US$50 000 equivalent to about $10M, a paltry amount from a multinational that echoes the pattern of the lop-sided terms of the production sharing contract with the Government for the Stabroek Block. Yesterday, the China National Offshore Oil Company (CNOOC) donated its $10M to the CDC.
Announced in May 2015, the Liza discovery in the Stabroek Block was the first significant oil find about 120 miles offshore Guyana by the XOM-led consortium. The company’s affiliate, Esso Exploration and Produc-tion Guyana Limited (EEPGL), enjoys 45 per cent interest in the huge 6.6 million acres concession, while Hess Guyana Exploration Ltd has 30 per cent, and China’s National Offshore Oil Corporation (CNOOC), 25 per cent interest through its CNOOC Petroleum Guyana Limited.
ExxonMobil secured such an advantageous sharing agreement, it agreed to a secret US$18 million signing bonus with only 2% royalties payable on the oil produced and a 50% profit sharing clause, which only applies when as much as 75% of exploration and development costs have been recovered.
President of ExxonMobil Guyana, Alistair Routledge, in handing over the cheque commented, “The magnitude of this flood and how it continues to affect so many people across Guyana is truly sad to see. We recognize that there are so many needs at this time, and we are pleased to support the efforts of the Civil Defence Commission in bringing much-needed relief to those affected.”
ID worries about the climate extremes to come especially as energy analysts do not see Exxon slashing its biggest ventures including in Guyana and Brazil, two of the flood-hit states in South America.
