No insurance provision in Oil Contract for destruction of fishing grounds

Feb 05, 2018 ExxonMobil, News

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– nothing also for impact on coastal communities, neighbouring countries

By Kiana Wilburg

There are many examples around the world where the governments ensure that oil companies provide insurance which would ensure compensation for any impact on communities and neighbouring countries due to the said operations. Unfortunately, Guyana is not one of those nations.
In the Production Sharing Agreement (PSA) signed between the Government of Guyana and USA oil giant, ExxonMobil, there is no provision regarding any adverse impact on fishing grounds and coastal communities or on neighbouring countries.
This alarming observation was recently pointed out by Chartered Accountant, Chris Ram and political commentator, Ramon Gaskin.
Ram in his recent writings noted that Article 20.2 of Guyana’s 2016 Oil Agreement deals with Insurance in respect of, but not limited to assets, pollution, third parties and employees. The Attorney-at-Law pointed out that the Agreement does not require any loss of production insurance as will apply in the case of any major disruption of production or environmental accidents. He said that while this provision is absent from the 2016 Agreement, the 1999 Agreement which was signed by the Jagan administration, allowed for insurance to be taken out by Esso Exploration and Production Guyana Limited’s affiliate insurance company. Esso is a subsidiary of ExxonMobil.
Ram stated, “That requirement has been changed and now allows the Contractor to have the right to self-insure against the risks identified. This is a major concession by (Natural Resources Minister, Raphael) Trotman on an issue that only specialist lawyers know about. What it means in practice, is that anyone seeking to make an insurance claim will have to lodge that claim against Esso, CNOOC/Nexen or Hess, all of which are external companies. Those potential claimants must thank Raphael Trotman for making their chances even more difficult to succeed.”

CASE OF UGANDA
In 2012, the Government of Uganda signed a PSA with British operator, Tullow Oil. That entity is also exploring in Guyana’s deep waters.
In the PSA of that African nation, there are strict provisions for Insurance.
The PSA notes that the Licensee is to provide a Performance Security in the form of Insurance Bond or Bank Guarantee amounting to USD $500,000.00 which shall, inter alia, guarantee the payment by Licensee of the sums, if any, due and payable to the Government pursuant to the paragraph hereunder.
“To ensure that Licensee, its Contractors and Sub-contractors meet their obligations to third parties, or to the Government, that might arise in the event of damage, loss or injury (including environmental damage or injury, removal of wrecks and cleaning up caused by accidents) caused by Petroleum Operations, Licensee shall maintain in force an insurance policy through an international insurance company of good financial standing covering the activities of itself and its contractors and sub-contractors, sublicensees and the employees of all such parties.”

“…To the extent that third party liability insurance is unavailable or is not obtained, or does not cover part or all of any claims for damage, loss or injury caused by or resulting from Petroleum Operations, Licensee shall remain fully responsible and shall defend, indemnify and hold the Government harmless against all such claims by the Government arising from any such damage, loss or injury. Licensee shall indemnify, defend and hold the Government harmless against all third party claims for damage, loss or injury, including, without limitation, claims for loss or damage to property or injury or death to persons, caused by or resulting from any Petroleum Operations conducted by or on behalf of Licensee.”

OIL SPILL ISSUES
With ExxonMobil set to kick start in March 2020, Guyana is yet to see what provisions are in place by the company or the government in relation to oil spill prevention and the readiness to respond.
Asked by Kaieteur News about contractual provisions for such an eventuality. Country Manager for ExxonMobil, Rod Henson advised that there is “language” in the contract it has with the Government which speaks to this.
But the only detailed financial arrangement in place Article 28 of the Contract, which focuses on Social Responsibility and Protection of the Environment, is for social and environmental projects to be discussed and agreed upon by the two parties.
That arrangement says, “The Minister and the Contractor shall establish a program of financial support for environmental and social projects to be funded by the Contractor. The Contractor shall directly fund the amount of three hundred thousand United States Dollars (US$300,000) per Calendar Year with any unspent portion carried over into the ensuing Calendar Years of the Agreement.”
Furthermore, Henson noted that ExxonMobil has in place, its own Oil Spill Response Plan. He said that the Government of Guyana is in possession of this document. The nation is yet to see this plan.

EXXONMOBIL’S OIL SPILLS
Over the years, ExxonMobil has been criticized for causing some of the world’s most detrimental oil spills, leaving marine life as well as communities devastated for decades.
One of the worst in its track record is the infamous Exxon Valdez oil spill which occurred in Alaska on March 24, 1989. The Exxon Valdez, an oil tanker owned by Exxon Shipping Company, was bound for Long Beach, California. On its journey, it struck the Prince William Sound’s Bligh Reef and spilled 10.8 million gallons of crude oil for several days. Given its effects, it is considered to be one of the most devastating human-caused environmental disasters.
But more than 20 years later, many question whether ExxonMobil actually learned anything from the great Valdez mistake.
On May 1, 2010, a ruptured ExxonMobil pipeline in the state of Akwa Ibom, Nigeria, spilled more than a million gallons of oil into the delta. The leakage contaminated waters and coastal settlements in the predominantly fishing communities along Akwa Ibom.
Importantly, Nigeria’s authorities flagged ExxonMobil for its response to the oil spill as it sought to use certain chemicals which were proven to be toxic to human and marine life.
In fact, Rev. Samuel Ayadi, Akwa Ibom State Chapter Chairman of Artisan Fishermen Association of Nigeria (ARFAN), said that ExxonMobil was in the habit of using dangerous chemical dispersants which are scientifically proven to be toxic to human and aquatic life to clean up oil spills whenever they occur.
He also noted that dispersants were even more dangerous than crude oil because it breaks down the crude oil and sinks it to the sea bed where it kills fish eggs and fingerlings thereby wiping out generations of fish stock and other sea food and marine creatures that make up the food chain.
Even as early as February of this year, ExxonMobil found itself under investigation after Australian regulators discovered that there was an oily sheen around ExxonMobil’s rig in the Bass Strait of Australia.
The findings of the investigation revealed that it was indeed an oil spill caused by ExxonMobil and worse yet; its failure to properly respond increased the risk of contamination and posed a “significant threat to the environment.”
Sources used: https://en.wikipedia.org/wiki/2010_ExxonMobil_oil_spill, http://www.petrocom.gov.gh/assets/Petroleum(Exploration%20and%20Production)Act2016.pdf, https://en.wikipedia.org/wiki/Exxon_Valdez_oil_spill, https://www.theguardian.com/environment/2017/feb/03/oil-spill-near-exxonmobil-drilling-platform-in-bass-strait-to-be-investigated, https://www.theguardian.com/environment/2017/may/10/exxonmobil-criticised-over-response-to-bass-strait-oil-spill

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