Imagine that you were lucky to be awarded a house lot. You hire a contractor company to fence off your plot of land and you intend to use them to build your house. But on review of the bill for the fencing, the numbers don’t add up. You will be outraged and will seek to understand why you were overcharged and demand a refund. Surely, you would not approve the next task to build the house. If the bill is questionable for a small item such as the fencing, why would you trust this company with a significantly more expensive task? But this is what is playing out in Guyana today with the rush to approve another oil project when it appears we have still not finished auditing the pre-contract costs up to 2015. Additionally, with every project we ramp up the chances of a major oil spill that can bankrupt Guyana.
The overstatement of the US$460 million pre-contract costs that ran from 1999 to 2015 was publicized by Chris Ram in May 2018. The government hired a contractor in December 2019 to audit the pre-contract cost but it is coming up to 2 years now and there has not been any indication if the audit is completed or when it would be completed. In the meantime, we have approved Liza 1, Liza 2 and Payara with total capital cost of about US$18.5 billion. There has been no indication if any auditing of those capital costs were performed although the window is closing on auditing those costs. There were anomalies raised with regard to the capital costs when comparing the data across the wells, see here: https://www.oggn.org/2020/11/02/why-are-we-paying-us4-3-billion-more-for-payara-when-compared-to-liza-phase-1/.
It seems we are now in a rush to approve a fourth project named YellowTail which is slated to cost US$9 billion. EPA meetings are now advertised for YellowTail. However, we are still not sure how many if any of the crucial questions raised during the EPA meetings on the gas-to-shore project have been addressed. It seems like the government is just going through the motions of holding meetings and not being transparent on addressing the questions raised by civil society. Why the rush to approve new oil projects when there are serious questions outstanding on the cost of these projects? But it is not only the cost that is an issue, the question of who pays the cost for a major oil spill is more troubling.
We are playing Russian roulette, whereby with every oil project, we increase the number of bullets we place in the barrel of the gun. Let’s say for every project there is a 90% chance for the life of the project that there are no oil spills. If we have one project, there is a 10% chance of an oil spill. If we have 4 projects that increases to a 34% chance for an oil spill. The relationship is simple, the more projects we approve the chances of an oil spill increases. We have more than 20 discoveries in the Stabroek Oil block. At some point, our luck will run out and a major oil spill with no viable insurance plan will be the fatal shot to Guyana. We demand that no more oil projects be approved until the pre-contract costs and the US$18.5 billion capital costs for the three oil wells to date are verified and, more importantly, that the parent oil companies bear the full insurance burden of any oil spills.
Sincerely,
Darshanand Khusial
