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Jagdeo believes Exxon, CNOOC and Hess would pick up insurance bill…but Guyana has no guarantee in writing
By Shikema Dey
Vice President Bharrat Jagdeo
Oil from the BP oil spill is seen on the surface of the Gulf of Mexico. Julie Dermansky/Corbis/Getty 2019
The Exxon Valdez oil tanker spill March 24, 1989, blackened hundreds of miles of coastline in Alaska’s Prince William Sound, devastating wildlife and altering lives in fishing communities for generations. (John Gaps III / Associated Press)
Kaieteur News – Guyana’s pocket would bleed tremendously if an oil spill or any other disaster should occur at any of ExxonMobil’s approved projects. Why? It is due to the fact that country remains without comprehensive insurance coverage from Stabroek Block operators; ExxonMobil, Hess and CNOOC/NEXEN.
What Guyana does have however, is an agreement with Exxon’s subsidiary, Esso Exploration and Production Guyana Limited (EEPGL). But that company has little assets, so little that it would not be able to carry the cost of any disaster that could occur in the Stabroek Block area, which would leave Guyana to bear the costs.
And while Vice President Bharrat Jagdeo believes that Exxon and its partners should be the ones accepting liability for such disasters, the current administration has received no commitment from ExxonMobil detailing this.
The Vice President was responding to a question posed by Kaieteur News on the topic at his press conference held yesterday when he relayed, “That has been an old longstanding issue and you know what the answer is.”
“You are not going to get a new answer from me now. Right now, the incorporated company…but we believe the liability passes to the parent company,” he stated, continuing “we internally, we believe that.”
When asked whether government is comfortable with that arrangement, the VP outlined that the issue will be addressed in the new licensing agreement with the Stabroek Block partners.
“These things have to be clarified crystal clear; they have to be crystal clear,” the VP added.
It was the then Director of the Environmental Protection Agency (EPA), Dr. Vincent Adams, that included in the Environmental Permits for Exxon’s Liza Two and Payara projects, a provision that safeguards Guyana from accepting liability from any disasters. That provision would also be included in all other permits not only for Exxon, but other oil companies.
However, it was not included in the permit for Liza One. And while the EPA now under the control of Sharifa Razack has the authority to amend the permit, it has made no move to do so, leaving Guyana at further risk.
Guyana was advised by international lending agency, The World Bank to demand comprehensive insurance policies from operators. It had 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 oil industry regulators should 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 highlighted that there is insurance that covers a blowout from an oil project, referred to as the Operators’ Extra Expense (OEE) insurance.
It had said too 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, citing the case of the major oil spill, which occurred in 2010 in the Gulf of Mexico.
That spill led to a loss of 53,000 barrels of oil a day for many weeks and covered 6,500 square kilometers, involving five million barrels of oil. The source, the Deepwater Horizon field, was operated by British Petroleum (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, one that the company is still paying for.
Exxon is no stranger to oil spills either.
There was the 1989 Exxon Valdez Oil spill, said to be one of the most devastating man-made disasters in the world. The Exxon-Valdez oil tanker ran into a reef in Alaska causing more than 10 million gallons of oil to cloak the Alaska coastline.
The spill killed thousands of whales, seabirds and other marine life. The tourism and fishing industries were devastated for years.
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