In the face of the climate crisis and low oil prices that threaten the business case for fossil fuel producers, ExxonMobil is moving forward with one of the biggest oil projects proposed in the past decade—drilling off the north coast of South America into a deep-water reserve that could contain over 8 billion barrels.
A consortium led by Exxon hopes to be extracting three-quarters of a million barrels of oil per day from Guyana’s sea floor by 2025.
“This will accelerate the climate emergency,” Jonathan Gant, a senior campaigner at the London-based advocacy group Global Witness, told VICE News.
To get global emissions under control, companies like Exxon need to cut their oil and gas production more than one-third by 2040, says the research group Carbon Tracker. Even then, there’s only a 50 percent chance of stabilizing global temperature rise at the 2 C target contained in the Paris climate agreement.
Exxon’s Guyana project would take us in the opposite direction. The European environmental group Urgewald calls it “a carbon bomb” that could result in over 1 billion tons of planet-warming CO2 being released into the atmosphere.
Exxon did not respond to a request for comment.
This could have a heavy impact on citizens of Guyana, roughly 90 percent of whom live in low-lying coastal areas. The global heating caused by burning the country’s huge oil reserves will make them even more exposed to rising seas.
“Guyana is on the front line of the climate emergency,” Gant said. “Increased flooding will ruin people’s homes and drinking water. And because almost all of Guyana’s farming occurs on the coast, floods will devastate crops used to feed the country and for export.”
But the country’s political leaders and the oil companies trying to make deals with them are mostly focused on short-term riches. Guyana now has the chance to go from being one of the poorest countries in South America, where the average per capita income is $4,000 per year, into a major global oil producer annually earning $30 billion in revenues.
The question of who gets to preside over this windfall caused the country’s March election to devolve into chaos, with allegations of vote tampering and fraud delaying a new president from being sworn in until early August.
Global Witness is now urging the government led by Irfaan Ali to renegotiate the “exploitative” oil deal it signed with Exxon in 2016, which the group claims deprives Guyana of $55 billion in oil revenues. Exxon told the New York Times the deal is fair because Guyana is a risky country to operate in.
The first two phases of Exxon’s offshore production plans are already approved, totalling about 340,000 barrels per day of potential production. And with months of political turmoil over the results of Guyana’s spring election appearing to be resolved, the Texas-based company is in talks to get approval for the third phase, which would add an additional 220,000 barrels per day.
“It’s a massive development,” Jennifer Rowland, a senior energy analyst at the Edward Jones investment company, told VICE News. “They’re not done as far as the exploration potential; it’s probably just going to get bigger.”
Exxon is facing financial pressure to develop the Guyana oil fields as fast as possible.
As recently as 2013, the Texas-based oil major was the single most valuable company in the world. But a series of poorly timed business decisions such as investing $41 billion in natural gas right before gas prices plummeted, along with the rapid decline in demand for oil caused by the coronavirus pandemic, has caused Exxon to nose-dive.
The company’s market value has declined by $267 billion since 2014. In late August, Exxon’s poor stock market performance caused it to be kicked out of the Dow Jones Industrial Average, an index tracking the stock market performance of large companies that Exxon has been on for more than 90 years.
In response to its financial losses, Exxon has announced major spending cuts to its operations in the U.S. and Mozambique. But its plans for Guyana have been “largely unaffected,” the company’s CEO Darren Woods said in May. “Guyana remains an integral part of our long-term growth plans and as such is a high priority.”
Tapping the country’s huge offshore oil reserves could intensify the climate impacts already being felt across the planet. Record-breaking wildfires linked to climate change are currently blazing through California. And warmer oceans played a factor in Hurricane Laura being one of the strongest storms to ever hit the U.S. Gulf Coast in late August, killing six people and causing potentially $20 billion in damage, according to a Moody’s estimate.
“It is clear that to avoid the worst impacts of climate change the world’s new finds of oil and gas will need to stay in the ground,” Gant said.
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Correction: An earlier version of this story incorrectly spelled Jonathan Gant’s name.