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Parent companies accept oil spill liabilities for subsidiaries–EPA Head
As exploration and development activities continue to increase offshore Guyana, Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams has assured that all oil spill liabilities would be covered by the polluters.
EPA Head, Dr. Vincent Adams
Dr. Adams noted that the oil companies have environmental permits with provisions which note that all costs for incidents that cannot be handled or covered by the insurance of the subsidiaries would be completely taken care of by the parent companies.
The EPA Head said, “As you are aware, the Production Sharing Agreements (PSAs) we signed are with the limited liability companies, not the parents. Those subsidiaries don’t have a lot of assets. So what we did was to ensure that in the permits, we got the parent companies to agree that they will pick up any costs that are not covered by the subsidiaries.”
Dr. Adams added, “We are working out other details. Remember there are three companies in the Stabroek Block– Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), Hess Guyana and CNOOC/NEXEN Guyana.
“They will work out who will deal with what percentage of an incident and get back to us with that.”
ExxonMobil’s Public and Government Affairs Advisor, Janelle Persaud, confirmed that the company has insurance in place for all activities in the Stabroek Block. The insurance is either consistent with or exceeds global industry standards.
The name of the insurance company that was used and the amount of the insurance secured were not provided to Kaieteur News. Persaud said that Exxon does not discuss specific policies and amounts publically.
COMPREHENSIVE INSURANCE
In light of the fact that oil spills can result in long term damage to a nation, several organizations have urged Guyana and many other emerging oil producers to ensure oil companies present comprehensive insurance that provides coverage for the eventualities that may arise from their operations.
One of the many advocates on this matter is the World Bank, one of Guyana’s development partners. According to the organization, it is expected that oil companies take out insurance for their operations in any country.
However, the World Bank warned that operators have often sought insurance which only covers certain activities. These may include third party legal liability and control of wells, re-drill, and cleanup of sudden and accidental pollution from a well out of control.
It cautioned that industry regulators must ensure that an operator’s insurance covers every possible eventuality since “for some operators, their insurance excludes blowout or subsurface pollution or below-wellhead risk.”
The World Bank noted that there is insurance that covers a blowout from an oil project. It is referred to as Operators’ Extra Expense (OEE) insurance.
The World Bank said that emerging oil producers such as Guyana would want to ensure that this is in place especially when one considers how other nations suffered in the absence of this.
In this regard, the financial institution cited the case of the major oil spill which occurred in 2010 in the Gulf of Mexico. The spill led to a loss of 53,000 barrels of oil a day for many weeks. It covered 6,500 square kilometers and involved five million barrels of oil.
The source, the Deepwater Horizon field, was operated by BP under a joint operating agreement with Anadarko Petroleum and Mitsui Oil Corporation.
The financial consequence of the spill was more than US$8 billion since the insurance of the operator did not cover pollution following a blowout.
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