Despite sustained public pressure…Guyana still without full coverage insurance from oil sector

Feb 28, 2022 News

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By Renay Sambach

Kaieteur News – Since Guyana’s first oil discovery in 2015, and almost three years after commencing oil production, the country is still without full coverage insurance – something that the citizens have been calling on the government to secure.
It is well known that insurance plays an important part in the lives of many people. To avoid putting oneself in expense and to safeguard one’s self, most people ensure they secure life, car and even property insurance.
While one can secure limited or full coverage insurance, the latter as the name suggests, fully covers what has been insured.
It is against this backdrop that citizens are questioning the logic in the government’s approval of new oil fields for American oil giant, ExxonMobil and its partners, without first securing full coverage insurance to protect the country should a disaster occur.

On June 2, 2021, Kaieteur News Publisher, Glenn Lall, started a public demonstration to get the authorities to renegotiate the terms of all foreign contracts, and fix other issues in the oil and gas sector.
Since then, a number of citizens have joined in the protest calling on the government to make things right in the industry, so as to give every citizen a better life and secure wealth for future generations.
Citizens, led by Lall, have been taking to the streets and protesting. They have been calling on the government to bring the oil giant to the table to secure, among other things, full coverage insurance for the country.
Just recently, on the sidelines of the International Energy Conference 2022, which was held at the Marriott Hotel, citizens staged daily protests calling for a renegotiation of the heavily criticised ‘lopsided’ Production Sharing Agreement (PSA) that Guyana signed with Exxon. The protestors again lobbied for full coverage insurance.
Around that same time, Opposition Member of Parliament (MP) and Shadow Oil and Gas Minister, David Patterson tabled a Motion in the National Assembly calling for liability insurance coverage in the event of an oil spill disaster. That Motion is still to be considered by the House.
But despite sustained public pressure, the Guyana Government continues to give Exxon permission to operate without full coverage insurance. Just recently, ExxonMobil announced that it has commenced oil production at Guyana’s second offshore development area called Liza Phase Two in the Stabroek Block.
With production commencing at Liza Phase Two in the Stabroek Block, along with the Liza Phase One Project, this has brought the total production capacity to more than 340,000 barrels per day (bpd). Exxon said that production at the Liza Unity floating, production, storage and offloading (FPSO) vessel is expected to reach its target of 220,000 barrels of oil later this year, as operations continue to be brought safely online.
The Liza Unity arrived in Guyana in October 2021. It is moored in water depth of about 1,650 metres and will be able to store about two million barrels of crude.
Moreover, the oil giant said that it anticipates that four FPSOs, with a capacity of more than 800,000 barrels per day, will be in operation on the Stabroek Block by year-end 2025. Expounding on upcoming projects, the American company said Payara, the third project in the Stabroek Block, is expected to produce approximately 220,000 barrels of oil per day using the Prosperity FPSO vessel, which is currently under construction.

The field development plan and application for environmental authorisation for the Yellowtail project; the fourth project in the block, has been submitted for government and regulatory approval.
Importantly, the government allowed operations to commence at the Liza Phase Two project in the absence of full coverage insurance for an unmitigated oil spill or similar environmental disaster. This means that Guyana’s pocket would bleed tremendously if an oil spill or any other disaster should occur at any of ExxonMobil’s approved projects.
The citizens have been protesting because Guyana does not have comprehensive insurance coverage from Stabroek Block operators ExxonMobil, Hess and CNOOC-Nexen. In fact, what Guyana does have 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 bear the cost if any major disaster occurs in the Stabroek Block area, thus leaving Guyana to bear the cost.
Guyana’s Vice President, Dr. Bharrat Jagdeo, is reported in the media on February 10, 2021, as saying that he believes that Exxon and its partners should be the ones accepting liability for such disasters. But the current administration has received no commitment from Exxon in this regard.
However, the Vice President said that his government is working to secure up to US$2B from ExxonMobil to cover any damage that may result from the US$9B Yellowtail Project, the fourth to be developed in the prolific Stabroek Block. A state of affairs that worries former Head of the Environmental Protection Agency (EPA), Dr. Vincent Adams, who revealed via a letter, that before his contract termination – as the EPA boss – he had gotten Exxon to agree to full coverage insurance, a commitment that has slipped through the hands of the ruling PPP/C government.
Dr. Jagdeo, during a recent conference, shifted the responsibility for ensuring that Guyana benefits from full coverage insurance to the EPA.
SURINAME
Suriname in contrast has made it a non-negotiable position to have parent companies provide insurance to cover any disaster.
While Suriname still has a few years to go before offshore oil production commences, it has outlined a suite of high standards for all oil companies to follow. One such principle applies to insurance for oil spills.
Confirming this industry requirement recently was former head of Staatsolie (Suriname’s National Oil Company), Rudolf Elias.
Last year, during an interview on the Kaieteur Radio programme, Guyana’s Oil and You, Mr. Elias noted that all the companies operating in its basin are very well prepared to handle the possibility of an oil spill, not just during the oil production stage, but in exploration as well.
Elias said Suriname, and its entire oil industry by extension, understands the importance of being well prepared, especially when one recalls the lessons of the tragic Deepwater Horizon oil spill, which occurred in April 2010 in the Gulf of Mexico on the BP-operated Macondo Prospect.
The Deepwater Horizon incident is considered to be the largest marine oil spill in the history of the petroleum industry, costing the lives of 11 men. The industrial disaster also resulted in over four million barrels of crude oil being spilled into the Gulf of Mexico, which disrupted the entire region’s economy, damaged fisheries and critical habitats, and brought vividly to light, the risks of deepwater drilling for oil and gas.
Elias said, therefore, “…In the end, the parent company will have to take full responsibility…So it is always good to have the mother company be the guarantor for the event of an oil spill.”
PERU
Meanwhile, the Peruvian government is still dealing with an ecological disaster caused by an oil spill from one of the companies that is also operating in Guyana’s backyard.
This publication reported that on January 15, last, approximately 12,000 barrels of crude was spilled from one of Repsol’s refineries.
The oil spill occurred at one of the La Pampilla refineries off the coast of Ventanilla in the region of Lima, Peru. It was reported that the spill was caused by shock waves from an undersea volcanic eruption near Tonga in the South Pacific Ocean. At the time of the undersea eruption, Suezmax tanker, Mare Doricum, was offloading a shipment of Brazilian crude oil at one of La Pampilla refinery’s offshore mooring buoys, and as such, a quantity of the cargo had spilled.
Repsol had underreported the quantity of crude that was spilled but later investigations by Peru’s Agency for Environmental Assessment and Control (OEFA) revealed that almost 12,000 barrels of oils had spilled – more than double the amount that was initially reported by the company.
More than a month after the ecological disaster, the country is still grappling with the clean-up and remediation. A Peruvian official recently announced that the company is not fulfilling its obligation.
However, the country continues to take actions against Repsol. These have included the barring of four of its executives from leaving Peru, suspending the company’s hydrocarbon operation and imposing several fines for non-compliance.
The clean-up and remediation of the oil spill is expected to cost US$65 million. At least this is what was announced by Repsol’s Chief Executive Officer (CEO), Josu Jon Imaz.

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