Finding the Balance between Oil Operations and Environmental Risk Management
Good morning one and all. Mr. Chairperson, members of the head table, Members of the Diplomatic Corps, special invitees, members of the media, ladies and gentlemen:
We are often reminded that to whom much is given, much is required. This verse has never been more apt than in the present context as we ramp up towards first oil. Moreover, even before this conference commenced, we were reminded about the prolific rate of oil discovery in the Cooperative Republic of Guyana with two new finds! Not only is much expected of us all who have a responsibility to manage these resources for current and future generations, but it behoves us to do so in the most cost effective and environmentally efficient manner, while confronting and overcoming the challenges that lie before us.
Guyana’s oil and gas industry, while still in its infancy stage, is truly on an upward trajectory. But the operations are occurring in a diverse range of habitats and ecosystems. These operations, therefore, have the potential, if not managed carefully and effectively, to place significant pressures on Guyana’s marine and coastal environments and inhabitants that depend on these for their livelihoods. In fact, they also carry regional implications.
Despite the drive to transition globally to more renewable forms of energy, as global population continues to rise, so too does the demand for useable energy and resources. For example, global primary energy grew by 2.9% in 2018 – the fastest growth seen since 2010! This occurred despite a backdrop of modest GDP growth and strengthening energy prices. For fossil fuels, global consumption rose more rapidly than overall production, resulting in further production pressure for oil and gas companies. But meeting the rising global energy demand comes with risks and increasing costs to both society and the environment. Oil and gas companies are thus faced with the challenge of meeting the world’s expanding energy demands while minimizing the negative externalities associated with these operations. Thus, the timeliness of this Conference that has brought together Government agencies, the operators and contractors, academia, and industry experts in a forum of this nature.
While there are both international and national regulations regarding best practices, many of the risks the oil companies will face, are site-specific, requiring detailed background research and precautionary measures that cannot be solved using a generalized framework. It is within this context that the need to address these concerns, that oil and gas companies must develop and inculcate a risk management system and ethos, and operational practices to minimize harmful environmental impacts and incidents. This can be achieved through embedding environmental concerns into all aspects of daily operations and utilizing the most appropriate technology, thus allowing companies to achieve socially beneficial outcomes, while avoiding potential disasters and more stringent legislation. As such, inserting environmental proactivity is crucial because unsustainable business practices pose serious threats to the environment at the local and regional levels.
It is a well-established fact that oil and gas operations often threaten delicate habitats that may result in biodiversity loss, coastal pollution, and produce harmful air emissions. Incidents and oil spills can result in soil and groundwater contamination as well as marine and freshwater discharges. These accidents can occur in diverse locations with impacts varying in severity based on the stage of operation, sea currents, wind direction and response systems.
A UN report estimates that global corporate environmental damage costs $2.2 trillion annually, with an estimated global cost of $28 trillion by 2050. This includes anthropogenic greenhouse gas emissions as well as local air and water pollution. What it brings to mind is the significant impacts that this industry can have, but we’re not just focused upon negativity here; we also need to have a balance.
The incidents that arise from these oil operations may threaten more than just environmental quality, and unless properly managed may result in changes in the condition of the exploited habitat. These habitats are critical to local populations whose traditional culture and lifestyles are often affected. The highly integrated nature of societal health, safety with the environment poses dangerous consequences to humanity as whole. To decrease the negative effects of these operations on society and the environment, it is essential that a risk management approach be adopted, using the most appropriate technology, informed by data, and executed through collaboration.
Over the years, we have seen that international frameworks, declarations, and treaties have been developed to combat the challenges associated with protecting the environment. Unfortunately, these international agreements have not proven to be an effective method to compel large oil and gas companies to manage their environmental impacts. Similarly, traditional strategies of implementing national policies tend to lack the ability to eliminate incidents caused by energy exploration and production.
Combating environmental issues through foreign and domestic legislation has been met with limited success in many jurisdictions, but tend to be most successful where environmental risks are explicitly embedded in daily operations. Approaching decisions regarding environmental risks in the same fashion as any other risk incurred by the company serves multiple purposes. Making environmental goals part of the business plan as opposed to a secondary task helps align the internal values and actions of company employees with the external views of the corporation as a whole. There is significant advantage in placing emphasis on preventive measures instead of alleviation methods.
But we must also admit that environmental risks are accompanied by a high degree of uncertainty, making it challenging for corporations to predict the precise benefits from preventing the occurrence of an incident. Addressing these issues thus requires a high degree of judgment by the company’s management team, working with the best data and information available. By aligning corporate and environmental goals, oil companies can create a flexible, company-specific framework that can be applied at each operational site. Site managers could be responsible for enforcing this framework, ensuring compliance and the correct application in accordance with site specific nuances. Ultimately, the oil and gas industry is faced with the challenge of aligning short-term financial gains with the long-term environmental risks.
As global energy requirements escalate, so does the demand for improved environmental efforts. Oil and gas companies are thus faced with the pressure to deliver both high returns to their shareholders while still producing social good.
Challenges to incorporating these environmental risks into all activities may include adjusting the company image and matching internal values with external views of the company. Monetizing environmental risks through cost-benefit analyses may also assist in garnering shareholder support for spending extra corporate dollars on environmental risk prevention measures. Ultimately, the highly integrated nature of human health and safety with the environment (HSE) suggests that environmental risks should not be secondary to other business concerns, rather the three should be considered with equal standing. The combination of international and national regulations with internal risk management approaches may prove to mitigate the negative externalities associated with oil and gas activities. While one approach has not proven to be stringent enough on its own, the combination of environmental risk management frameworks may be sufficient. This embedding of environmental concerns could be a possible solution to ensuring that oil and gas companies do not engage in these highly damaging business practices.
The Department of Energy (DE) is therefore pleased to be supporting this Conference with the emphasis on technological advances in subsea well control as the industry in Guyana pursues deeper offshore wells, and concomitantly, the country elaborates a robust Contingency Spill Management Plan.
Given the delicate ecosystems of our coastal and marine environments locally, and within the Region at large, we recognize the importance of keeping abreast with these developments, particularly with the challenges that drilling in deep water environments bring.
Furthermore, given oceanic conditions, regional collaborations for oil spill modelling, early warning, tracking and response are equally important. This Conference is occurring at an exciting time here in Guyana as we prepare to usher in a new chapter in our country’s history and take steps to secure revenue for current and future generations, while also leaving a legacy of sound environmental management practices.
In closing, and on behalf of my Minister, His Excellency the President of Guyana, Brigadier David Granger, I wish the Conference every success and look forward to the outputs to allow us to better manage this industry going forward.
I thank you.