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Guyana foots the bill for any disaster at Liza Phase One project
Lack of insurance from Exxon…
By Kemol King
This gray whale died in Alaska’s oil contaminated waters in 1989 after the Exxon Valdez Oil Spill, one of the most devastating man-made disasters (John Gaps III | Associated Press File)
Kaieteur News – Guyana may be covered for Exxon’s future oil developments, Liza Phase Two and Payara, in the event of an oil spill. But when it comes to Exxon’s current development, Liza Phase One, Guyana is left exposed. If an oil spill happens today, with repercussions for neighbouring states, Guyana would be paying compensation for losses for generations to come.
Former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams, had found that Guyana was not insured for Exxon’s ongoing projects, so he decided to include a provision in the company’s permits which would safeguard Guyana. This provision would be included, not only in Exxon’s permits, but in those of all oil companies.
He had explained that the Production Sharing Agreements (PSA) Guyana signs are with subsidiaries of oil companies, and not their parents. With limited assets, these subsidiaries are not equipped to cover the insurance needed if a major oil spill were to occur.
“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 had said.
For example, with the Stabroek Block, instead of signing a deal only with Esso Exploration and Production Guyana Limited (EEPGL) and its other partner subsidiaries, the Government would ensure that the parent companies (ExxonMobil, Hess and CNOOC) make a commitment to accept unlimited liabilities in the case of a disaster. They would be required to provide legally binding agreements to the EPA, which require them to provide adequate financial resources.
While Dr. Adams was able to secure this provision for Liza Phase Two and Payara, as well as Exxon’s later operations in the block, there is no such provision in the Liza Phase One permit.
By the time he took up leadership of the EPA, it was already too late for Liza Phase One.
ExxonMobil has been producing oil for about a year at this operation, using the Liza Destiny Floating Production, Storage and Offloading (FPSO) vessel. The ship can produce as many as 120,000 barrels of oil every day.
Kaieteur News reached out to Dr. Adams yesterday and he confirmed that Guyana is not covered from a disaster at Liza Phase One.
The World Bank has encouraged emerging oil producers to ensure that they have comprehensive insurance in place for disasters of this nature, as other nations have suffered dearly by not covering themselves.
It cited the case of a 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. In February, Bloomberg reported that because of the decade-old spill, BP is still paying for damages, with about US$70 billion in costs so far.
ExxonMobil is no stranger to oil spills either. One of the most devastating man-made environmental disasters in the world happened from Exxon vessel, the Exxon Valdez Oil Spill. The Exxon Valdez oil tanker ran into a reef in Alaska in 1989, causing more than 10 million gallons of oil to envelope the Alaska coastline. The spill killed thousands of whales, seabirds and other marine life. The tourism and fishing industries were devastated for years.
Imagine what would happen to Guyana if a spill like that happens and the country is left to pay off billions of dollars for generations while ExxonMobil walks away. That is a real possibility for the company’s operations offshore Guyana, right now.
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