IMF,Revenue Watch warns...Govt. must demand guarantees from parent companies in oil sector-it's necessary to ensure Guyana is fully compensated in any eventuality

IMF,Revenue Watch warns…Govt. must demand guarantees from parent companies in oil sector-it’s necessary to ensure Guyana is fully compensated in any eventuality

Jan 31, 2019 News

By Kiana Wilburg
Governments of oil producing nations should always examine the assets of subsidiary companies signing onto an oil deal with them. It could mean the difference between having full coverage from the company for accidents and a country having to deal with the expense on its own.
Considering this, the International Monetary Fund (IMF) and transparency body, Revenue Watch, have urged in numerous literature, that the choice of parties to any agreement should be treated with extreme caution. In this regard, the Revenue Watch for example has often warned of the ticks of oil companies when it comes to signing agreements.
The transparency body said, “Oil company partners in any deal with a host government will usually create a subsidiary to serve as party to the agreement. But this type of subsidiary will have limited or no assets of its own and it will not be able to rely on the financial resources of the parent company to stand behind its commitments, especially in regard to damages resulting from environmental pollution.”
Revenue Watch and the IMF have said, therefore, that it is expected of host governments to “require a guarantee from the ultimate parent company of the subsidiary so that the host government has a reliable contractual counterparty with the resources to cover all potential liabilities.”

OTHER PAYMENT /PROTECTIONS MEASURES
Guyana’s oil deal for the Stabroek Block is signed between the Government and ExxonMobil’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL). The Government did not express any concern in this regard. It has however, made some effort to ensure Guyana has some form of protection in place in the event that there are environmental casualties by oil operators.
Foreign Affairs Minister, Carl Greenidge, is one person who has recommended that the respective regulatory bodies for the looming oil sector have tankers contribute funds towards oil spill readiness and even have contracts with the Civil Defense Commission (CDC) on disaster risk management.
During the 2019 budget debates he had said, “Agencies such as the Maritime Administration Department (MARAD), the Environmental Protection Agency (EPA) and the Guyana Geology and Mines Commission (GGMC), among others, should have appropriate legislation for the sector and may wish to require tankers operating in Guyana contribute to funds and to have contracts with the CDC for example, to ensure that disaster relief arrangements are properly in place.”
Further to this, Greenidge noted that Guyana has already signed on to several conventions which will help to offer protection if such an eventuality occurs.
These include the International Convention on Civil Liability for Bunker Oil Pollution Damage (Bunkers Convention), 2001; and the International Convention on Oil Pollution Preparedness, Response and Co-operation (OPRC).
He said, too, that Guyana would also be able to benefit from the International Oil Pollution Compensation Funds (IOPC Funds) which provide financial compensation for oil pollution damage that occurs in Member States.
Guyana is also expected to sign on to the Protocol of 1992 to amend the International Convention on Civil Liability for Oil Pollution Damage.
The Foreign Affairs Minister said that the move to sign on to the aforementioned convention is based on advice that the Ministry would have provided to Cabinet, which it subsequently accepted.
Just a few weeks ago, Greenidge noted that Guyana and its CARICOM sister, Trinidad and Tobago, have already initiated talks on the exchange of resources for the former’s oil spill readiness.
The official said that these talks stem from the Energy Memorandum of Understanding (MoU) that was signed last year between the two parties. While most of the dialogue has been via emails and phone calls, Greenidge said that “an intensive face-to-face encounter” is expected before the end of the first quarter.
Greenidge said, “Discussions opened from the time TT’s Prime Minister (Dr. Keith Rowley) was here last year. The Department of Energy had a couple of exchanges and I spoke briefly at the ministerial level with some of the TT officials regarding the desirability of having an intensive face-to-face encounter before the end of the first quarter. Oil spill readiness is one of the matters which will take centre stage during the encounter.”
The Foreign Affairs Minister also stressed that while the responsibility of Guyana’s oil spill readiness does not rest with his Ministry, Cabinet was advised that certain international partners must be engaged on the matter.
The Minister said that there are other things to be done regarding the issue of oil spill readiness but this will be handled by the Environmental Protection Agency (EPA), the Energy Department and the Ministry of Natural Resources.
In addition to the efforts being undertaken by the Foreign Affairs Ministry, the Natural Resources Ministry is in the process of seeking international help on various issues, two of which include crisis management in the petroleum sector and boosting Guyana’s preparedness for oil spills.