Latest update December 21st, 2024 1:52 AM
U.S. eager to help Guyana with oil spill plan but, silent on absence of full coverage insurance from oil companies
Kaieteur News- The US Embassy here recently announced that the United States Coast Guard (USCG) and the Guyana Civil Defence Commission (CDC) commenced a six-month series of joint activities designed to assist Guyana in the development of a reliable national response system for oil spills while enhancing the CDC’s maritime oil spill prevention, planning, and response capabilities.
Kaieteur News understands that the USCG is able to do this with support from the US Department of State’s Energy and Mineral Governance Programme (EMGP).
It was noted that a virtual risk assessment workshop is scheduled for this month to build upon the progress Guyana has already made with the development of its National Oil Spill Contingency Plan and oil spill response capabilities. Furthermore, the USCG facilitators will guide the participants through an assessment of possible oil spill scenarios in Guyana to identify the most likely and most consequential scenarios. The US Embassy said the results will be used to identify possible improvements and updates Guyana’s National Oil Spill Contingency Plan.
Other activities in 2022 will include virtual exercise programme management training and in-person exchanges to observe oil spill response exercises. This partnership the embassy said, is part of the continued U.S. support for energy governance and commitment to regional security to help Guyana build its disaster response capabilities.
While the US Embassy is eager to help Guyana with a plan for response to an oil spill as well as the enhancement of skills and capabilities to clean up after one, it has been noticeably silent on the need for full coverage insurance from the parent companies of the subsidiaries operating in Guyana’s basin.
Since 2015, ExxonMobil Corporation, the parent company of Esso Exploration and Production Guyana Limited, has steered clear of being tied to full coverage insurance for its Stabroek Block projects, which are certain to deliver multi-billion dollar profits on an annual basis. Instead, it has placed only its subsidiary (EEPGL) on the hook if such an eventuality occurs offshore. This is the state of affairs with its Liza Phase One, Liza Phase Two and Payara Projects.
Following in its footsteps are Hess Corporation and CNOOC Limited, the other two joint venture companies in the Stabroek Block.
WORLD BANK URGES
In previously published articles, Kaieteur News placed the spotlight on the devastating economic, social and environmental impacts oil spills have had on many parts of the world. In some cases, the effects are irreversible. Considering this, international bodies have stressed on the need for countries to ensure the parent companies for subsidiaries provide “comprehensive” insurance to at least cover the costs associated with dealing with such events.
One of the many advocates on this matter is the World Bank, one of Guyana’s development partners. According to the organisation, 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 via their subsidiaries 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 highlighted 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 and had from parent companies 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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