The Abandonment Gamble: Who Pays When Exxon Walks Away?

THE 592 GUARDIAN ♦ Independent Accountability Journalism ♦Guyana

EDITORIAL♦THE STABROEK SURRENDER

Part III of IV.The Abandonment Gamble

The Abandonment Gamble: Who Pays When Exxon Walks Away?

Guyana is advancing billions of dollars to ExxonMobil, Hess and CNOOC to fund decommissioning decades before a single well is capped — with no trust account, no escrow, and no enforceable guarantee the money will still exist when the bill comes due.

Part I of this series examined the arithmetic of the 2016 Stabroek Block Production Sharing Agreement (PSA); Part II examined how Article 32’s stability clause froze that arithmetic beyond the reach of any future Guyanese government.                                        Part III turns to a liability few Guyanese have been told to think about at all: what happens to the Stabroek Block’s platforms, pipelines and wellheads once the oil runs out, who pays to remove them, and whether the money set aside for that purpose will actually be there when it is needed.

The industry term is decommissioning, or abandonment: the process of safely plugging wells, dismantling platforms, and removing subsea infrastructure once a field stops producing. For an operation the size of the Stabroek Block — four FPSOs and counting, with more under construction — specialists estimate the eventual cost in the hundreds of millions to billions of US dollars. Under the 2016 PSA, Guyana is already paying for it. The question this editorial puts on the record is where that money is going, and whether it will still be there in twenty years.

How the Mechanism Works

Under Section 20.1(d)(gg) of the PSA and Section 3.1 of Annex C, the Accounting Procedure, ExxonMobil and its partners are permitted to tabulate a projected abandonment budget and begin recovering a portion of that budget through cost oil years — potentially decades — before decommissioning actually takes place. In other words, the Contractor does not wait until the wells are exhausted to start being repaid for the cost of eventually plugging them. It bills Guyana’s oil now, against a bill that may not come due until the 2040s or later.

That last clause is the crux of the problem. Advance cost recovery for decommissioning is not, on its own, unusual in the international oil and gas industry. What is unusual — described by one American petroleum industry veteran as the most unusual provision he had encountered in any PSA he had reviewed — is that Guyana’s agreement contains no requirement that the money recovered for abandonment be placed in a trust account, an escrow, or any other ring-fenced instrument earmarked exclusively for decommissioning. The cash simply flows to the Contractor, indistinguishable from any other recovered cost, with nothing in the Agreement compelling ExxonMobil, Hess or CNOOC to preserve it for the purpose it was billed for.

What Independent Analysts Have Found

The Institute for Energy Economics and Financial Analysis (IEEFA), in a report authored by its then-director of financial analysis, Tom Sanzillo, quantified the exposure: Guyana is projected to advance more than G$666.1 billion — approximately US$3.2 billion — in cash to the oil companies, purportedly to cover future decommissioning costs, with no requirement that the companies set the money aside to guarantee it will be there when abandonment work actually begins.

Standard industry practice establishes that a trust account should be set up for a fossil fuel drilling and extraction project of this kind, one that can only be drawn upon to pay abandonment costs when they occur. Guyana’s agreement does not require that any such account be established.

— IEEFA, summarizing the Sanzillo decommissioning report

IEEFA’s warning was blunt: absent independent oversight of how the advanced funds are used, ExxonMobil and its partners have, in the organization’s words, a real opportunity to pocket the money — and if the companies were to sell their interests in the block before decommissioning is complete, passing the liability to a smaller, less capitalized successor, Guyanese taxpayers could be left to cover the shortfall themselves.

A University of Houston petroleum-accounting instructor, reviewing the same provisions for a separate analysis, reached a similar conclusion, noting that allowing cost recovery for abandonment twenty to thirty years before the funds are actually spent represents a significant financial benefit to the companies from a cash-flow and net-present-value standpoint, and stated plainly that it was the most unusual provision of its kind he had encountered in any production sharing agreement.

Guyana is paying today for a bill that will not come due for a generation — and trusting, on nothing but the word of three multinational companies, that the money will still be there.

The Change-of-Control Risk

This is not an abstract worry. The Stabroek consortium has already changed hands once at the corporate level: Chevron’s acquisition of Hess closed in 2025 only after an International Chamber of Commerce tribunal resolved a dispute between Exxon and CNOOC over rights of first refusal under the Joint Operating Agreement governing the block. Ownership of Guyana’s most consequential offshore asset is not static, and nothing in the publicly known terms of the PSA prevents a future sale of any partner’s interest to a smaller, thinner-capitalized operator less equipped to fund a multi-billion-dollar abandonment programme when the time comes.

Guyana’s Oil Czars.

Should that happen after the advanced decommissioning funds have already been recovered as cost oil, Guyana would be left in the position IEEFA warned of: having paid in advance for a service that a departed or under-capitalized operator may no longer be able to deliver, with no trust account to fall back on and no statutory lien to enforce.

A Pattern, Not an Isolated Clause

Read alongside Part II of this series, the abandonment provisions complete a picture of a Government that structured away not only its fiscal upside but its long-term protections. Article 32’s stability clause means Guyana cannot unilaterally impose a decommissioning trust requirement after the fact without the Contractor’s consent and, per the logic already established, without potentially triggering a compensation claim for interfering with the Contractor’s position under the Agreement. The absence of ring-fencing was not an oversight later correctable by ordinary legislation — it was locked in alongside everything else in 2016, and it remains locked in today.

Guyana’s own 2023 Model Production Sharing Agreement for future deepwater licences includes a dedicated Article 41 on Abandonment, evidence that the Ministry of Natural Resources has since recognized the need for clearer decommissioning terms in contracts going forward. But that model applies only to new acreage. It does nothing to retrofit protection into the Stabroek Block, where the overwhelming majority of Guyana’s current and projected oil revenue — and liability — resides.

What The 592 Guardian Is Asking

We are putting the following questions on the public record, to the Ministry of Natural Resources, the Department of Energy, and the Guyana Revenue Authority:

We extend the Government and the Contractor an open invitation to respond in full; any response received will be published without alteration alongside this editorial.

Part IV of The Stabroek Surrender will examine the flaring record at the Stabroek Block against the environmental standards the Government and the Contractor agreed to in 2016, and the enforcement gap between violation and consequence.

— The Board, The 592 Guardian