GUYANA: Govt. to now secure oil spill insurance from ExxonMobil – VP Jagdeo

— Govt. finally buckles under pressure of two year protest  …to now secure insurance from ExxonMobil for any Stabroek Block oil spill

March 26 – Kaieteur News – After two years of protest from citizens for full liability insurance coverage from oil giant ExxonMobil, in the unfortunate event of an oil spill in the country’s waters, Vice President Bharrat Jagdeo has finally come on record to assure that his administration is now working with the parent company to secure such guarantee. Jagdeo made the revelation on Thursday March 24, during an interview with one of the government’s communications specialist, Eddie Layne.

Since the startup of its oil operations in December 2019, ExxonMobil has evaded demands to provide insurance coverage, and instead tied its subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) to providing this guarantee. It has been argued however that EEPGL, being a fairly new company, with assets worth only around US$5 billion, would not be able to effectively cover all costs associated with an oil spill in Guyana, should such an adverse event occur.       

Map depicting the Stabroek and Kaieteur Blocks – click to enlarge

NO INSURANCE COVERAGE

So far, three of the oil company’s operations, Liza One, Liza Two and Payara have been granted approval, without guarantees in place from the parent company.

With approval for its fourth, the Yellowtail development project, in the making, Jagdeo has made it clear that a separate document will be issued to Exxon, which ensures a guarantee is secured, should an oil spill occur.

He said, “…Yellowtail will be stronger than any (Permit) they (the former government) have issued and separately, not part of the permitting process for Yellowtail, but separately. We are working with the companies to secure a parent guarantee that will cover the entire Stabroek Block. Not Liza 1, Liza 2, Payara or Yellowtail, but the entire Stabroek Block, but that is a separate issue.”

The Vice President did not disclose figures, or further details regarding the guarantee his government is now looking to secure from ExxonMobil, more than two years post first-oil.

Jagdeo was keen to note during his interview, however, that the former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams had merely thought of or “had something” up his sleeves while at the organization, but it is the PPP that is ensuring it is done.

On the same note, he criticized the Opposition for now filing motions and issuing statements on the matter which he said, is for the mere sake of politics.

Back in February, Shadow Oil and Gas Minister, David Patterson filed a Motion in the National Assembly calling for the government of Guyana to include full unlimited liability coverage for oil spills and other disasters, related to petroleum production, as a condition for granting approval for the Yellowtail development, and all other future petroleum development.

To this end, Jagdeo said, “Ignore all of these press releases and these statements and these Motions to Parliament. They are all done for the politics, not the substance of it or to help people. They are done for the politics to make them sound more attractive as though they care for people.”

He also made reference to improvements to the Environmental Permits granted to the oil company so far for the three projects, stated above.

According to him, “Some of the key elements that we got Exxon to commit to was a Cradle to Grave ownership and management of their waste that was not in the other two permits. So any waste generated by this company, they couldn’t give to their subcontractors and say you deal with that. They have responsibility for it. That is massive change. We then dealt with treated water. That is the water that is pumped up. The level of treatment that it has to undergo before it is released, we enhanced that…”

Only last month, ExxonMobil responded to a series of articles published by Kaieteur News on the issue of full liability coverage.

The company said, “Commentary on full coverage insurance and guarantees inaccurately suggest that ExxonMobil Guyana will not be able to effectively manage response activities. Insurance is just one source of financial assurance that could be leveraged for response activities. The value of insurance will not limit the company’s ability to respond to an event, and response activities would certainly not be delayed by discussions with insurers. We have the financial capacity to meet our responsibilities for an adverse event and we are committed to paying all legitimate costs in the unlikely event of an oil spill.”

It went on to explain that EEPGL, had, as of year-end 2020, almost $US5.0Bn in assets, which is a primary form of financial assurance, which is separate from the assets of the other Stabroek block co-venturers who also have substantial assets and share any liability for response activities.

Kaieteur News Publisher, Glenn Lall protesting against the lopsided oil contract with ExxonMobil. He also called for the company to provide oil spill insurance

In addition to this, ExxonMobil noted that it was working with the EPA and its co-venturers to put in place a combined $US2 billion of affiliate company guarantees.

Members of civil society have however protested the US$2 billion company guarantees, explaining that this sum would not be substantial enough, should an disastrous oil spill occur.

For instance, outspoken Attorney-at-Law, Christopher Ram, who has been keeping a close watch on Guyana’s oil and gas sector, recently told Kaieteur News that he believes US$2 billion in insurance would be a meagre amount compared to the possible implications such an event can cause, not only for Guyana, but to the country’s territorial neighbours.

“We would certainly want to see some sort of a binding guarantee from the contractors including Esso, Hess and CNOOC that they would guarantee all the costs involved in the consequences of any oil spill so I am suggesting that there should be something over and above the insurance. It would be good of course for the insurance to be much, much higher, but in this case… what we want is something from the parent companies,” he shared.

Since 2015, ExxonMobil Corporation, the parent company of EEPGL, has steered clear of being tied to full coverage insurance for its Stabroek Block projects, which are certain to deliver multi-billion dollar profits on an annual basis. Instead, its subsidiary, EEPGL will be officially on the hook if an oil spill occurs offshore. This is the state of affairs with its Liza Phase One, Liza Phase Two and Payara Projects.
In this regard, Kaieteur News has been leading the call and protests for government to secure full liability coverage. Protest action by the newspaper first commenced on June, 2, 2021.

This newspaper has also been at the forefront of calls for a renegotiation of the lopsided oil contract. The Guyana-ExxonMobil Production Sharing Agreement (PSA) is the only one out of 130 contracts worldwide, which has no ring-fencing provisions to prevent costs of unsuccessful wells being carried over to that of successful wells.

There is also no sliding scale for royalty to increase as production improves. That is not all. Additionally, Guyana’s PSA is the only one out of 130 that allows insurance premiums to be fully recovered as well as interest on loans and financing costs that are incurred by the contractors.

The need for Guyana to secure full liability coverage for a possible oil spill has been underscored by various scenarios around the world. Only recently, an oil spill occurred in Peru, a South American country.

The oil spill occurred on January 15, 2022 at one of the La Pampilla refineries off the coast of Ventanilla, in the region of Lima, Peru. It was reported that the spill was caused by shock waves from an undersea volcanic eruption near Tonga in the South Pacific Ocean.
Almost one month after the spill, the country was still grappling with the clean-up of the aftermath of more than 12,000 barrels of crude that contaminated its shores.

The clean-up and remediation of the spilled crude that contaminated the shores and waters of Peru will cost US$65 million, according to the Spanish oil giant, Repsol’s Chief Executive Officer (CEO), Josu Jon Imaz.

Post a comment or leave a trackback: Trackback URL.

Comments

  • Jerome  On 03/27/2022 at 7:27 am

    Why did it take protests from Guyanese to have an insurance clause be part of the EXXON/GUYANA agreement? This should have been done right out of the gate. Well let’s hope that EXXON does agree to be made responsible for any oil spillage that may occur in our waters…..read the fine print Jagdeo!!!!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: