Govt introduces US$45 flaring fee in Liza 2 Environmental Permit

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Flaring on Liza Destiny (Annette Arjoon)

In keeping with the government’s mandate of ensuring maximum benefits from Guyana’s oil and gas sector, the Environmental Protection Agency (EPA) this week amended Esso Exploration and Production Guyana Limited (EEPGL’s) environmental permit for the Liza Phase Two development. This asset is located in the prolific Stabroek Block.

In the amended permit seen by the Department of Public Information, ExxonMobil’s subsidiary, EEPGL, will now be required to pay US$45 per tonne of carbon dioxide equivalent (CO2e) emitted offshore Guyana at the Liza Unity operations as a result of excess flaring.

For context, flaring is the practice of burning the natural gas to ensure safe operations onboard the floating production, storage and offloading (FPSO) vessel. In the case of Guyana, ExxonMobil was last year forced to flare above the pilot level due to a defective gas compressor.

The EPA listed permissible instances of flaring only in the commissioning of equipment; start-up when oil production commences and special circumstances. The latter category includes cases of emergencies, whether they be controlled or as a safety response; maintenance; and the restarting/ resumption of operations on the floating production storage and offloading (FPSO) vessel.

Where any of the above mentioned special circumstances condition is expected to exceed 14 days, the permit holder, being EEGPL, will have to seek an approval from the EPA for flaring within the first 96 hours of its commencement. Further, where flaring during start-up is expected to exceed 60 days, EEGPL will seek an approval from the EPA for flaring no later than five days prior to the end of the 60 cumulative-day period.

The permit states that the subsidiary shall submit CO2e payment calculations within 28 days from the date of expiration of the approval granted by the EPA. CO2e emission payments shall be made payable to the EPA within 14 days of the EPA’s approval of the calculation.

In May 2021, the government moved to amend the Liza Phase One Environmental Permit which saw the introduction of a flaring. Initially, the fee stood at US$30 per tonne of CO2e emitted but it was later increased to US$45.

With this payment mechanism, the EPA has since collected approximately $900 million from EEPGL for its excess flaring.

During a press conference last year, Vice President Dr. Bharrat had noted concerns that Guyana may have to compensate the ExxonMobil-led consortium for any fine imposed on it because of the stability clause within the Stabroek block’s Production Sharing Agreement.

The clause, which was agreed to by former Minister of Natural Resources, Mr. Raphael Trotman in 2016, forbids the government from imposing new taxes or fees on the companies. If it does, Guyana would have to compensate those companies.

The Vice President gave assurances that no compensation would be offered. [Extracted from DPI]