Jagdeo justifies Exxon company providing oil spill insurance for Stabroek Block projects
Kaieteur News – Vice President, Bharrat Jagdeo on Thursday justified Guyana utilizing the services of an ExxonMobil-owned company to provide oil spill insurance for the Stabroek Block oil projects.
During his press conference at the Office of the President in Georgetown, the Vice President was asked whether government is comfortable with the existing arrangement. The question stemmed from concerns raised in the past week from civil society member Ramon Gaskin regarding the company providing its own oil spill coverage.
Gaskin believes that this move can endanger Guyanese and put the country at severe economic risk in the event of a disaster offshore. He said, “One of the problems with this insurance, as you know is the so-called insurance company that is owned by ExxonMobil so anytime you try to make a claim against them, you won’t get through because they are the same company that would have a claim against you.”
Jagdeo in responding to the query from Kaieteur News said he dealt with the issue before but nevertheless ventured to explain that the insurance premium provided is within industry standards. He said, “In the context of the audit this came up and one of the questions was whether the insurance was with a related company and we spoke about this and it’s related…they had an industry specialist look at the premium that was paid and whether that premium was higher than industry standard and it was found to be within industry standard so that question came up in the past and it was dealt with.”
The Vice President pointed out that in the context of Local Content he also laid those concerns to rest. He noted that some aspects of the insurance would be handled by locals while some aspects will be provided by overseas companies. This arrangement, according to the former President, ensures that the policy is economical since the premium being paid is funded through cost oil. This therefore means that a higher premium would reduce the share of profits.
The reporter however told the Vice President that there was still no clear position as to whether government was comfortable with the existing arrangement; however, he requested that the reporter moved on to another question.
It would be poignant to note that countries in the past have had to take legal action against oil companies for failing to compensate following a spill. Just last year it was reported that Spanish oil giant, Repsol, which is operating in Guyana, was still to honour its obligation to remediate the effects of an oil spill that occurred in Peru more than six months earlier.
On January 15, 2022 some 12,000 barrels of crude spilled from one of the La Pampilla refineries, which are owned by the Spanish oil giant, off the coast of Ventanilla in the region of Lima, Peru.
Repsol had blamed the spill on shock waves from an undersea volcanic eruption near Tonga in the South Pacific Ocean. It was reported that at the time of the undersea eruption, Suezmax tanker, Mare Doricum, was offloading a shipment of Brazilian crude oil at a La Pampilla refinery offshore mooring buoys when a quantity of the cargo was released.
The spill triggered a flurry of accusations and several Peruvian officials had called for those responsible to be held accountable. Peru’s Environmental Assessment and Control Agency (OEFA), an agency attached to the Ministry of the Environment (MINAM), had to impose several fines on Repsol for non-compliance with the cleaning and remediation of the January 15, spill. To date, the country is grappling to recover from what has been called an “ecological disaster.” Peru’s OEFA had to impose another fine on the oil giant for not complying with the identification of the areas affected by the displacement of the hydrocarbon spilled.
This is a troubling lesson for Guyana, where an average 400,000 barrels of oil is produced daily from two Stabroek Block projects- Liza One and Liza Two. A third project, Payara is expected to come on stream later this year.
While the country awaits the Court’s decision regarding full liability coverage from the parent company to cover costs associated with a spill in the oil rich Stabroek acreage, Guyana is heavily reliant on the limited US$600 million insurance being provided by an ExxonMobil-owned company, Ancon Insurance.
Two citizens had taken the Environmental Protection Agency (EPA) to Court for failing to enforce the provisions of the Liza One Permit requiring a parent company guarantee to cover costs above the insurance policy. High Court Judge, Justice Sandil Kissoon in May this year ordered Exxon to provide the signed guarantee or face a suspension on the Permit. Both the EPA and the oil company have appealed the Court’s decision, joined by the Government of Guyana. The matter is still pending before the Appeal Court.