We can never reduce oil spill risk to zero

Jun 05, 2022 News

…UN urges Guyana to fully prepare

Kaieteur News – The United Nations (UN), an intergovernmental organisation, has urged Guyana to fully prepare for an oil spill disaster as the risk of such an event can never be narrowed down to zero.

UN Resident Coordinator in Guyana, Yesim Oruc

On Saturday, the agency’s local arm – UN Guyana – issued a statement on the occasion of World Environment Day, being observed today (Sunday).
Titled ‘Guyana knows: environmental protection at home must be accompanied by international climate justice’ and sub-headed ‘No one person, country or company can afford to see the inaction of others as an excuse to shirk responsibility for our shared environment,’ the UN Resident Coordinator in Guyana, Yesim Oruc reminded that the earth is being shared, and therefore each person has a responsibility to stand up for it, nourish, restore and protect its systems and natural resources.
It is in this light that, she referenced Guyana’s offshore oil and gas operations. According to the UN Coordinator, “With drilling operations expanding off Guyana’s coast, it’s going to be absolutely vital that oil companies and national authorities are fully prepared to respond quickly and effectively to any kind of spill.”
More importantly, the Resident Coordinator explained, “The recent spill in Peru demonstrates that we can never reduce risk to zero.” It was also noted that while the 2020 launch of Guyana’s National Oil Spill Contingency Plan is a welcome development, it remains critical for continued and close collaboration between operators, insurers and national emergency responders to ensure readiness for a worst-case scenario off Guyana’s coasts.
The major offshore oil operator, ExxonMobil is yet to give Guyana full insurance coverage in the event of an oil spill for its ongoing operations. In fact, the company has said on numerous occasions, when asked about insurance, that it takes the necessary precautions to ensure that such events do not take place. For instance, ExxonMobil has explained that the company includes the use of “modern technology” to detect leaks and trigger shut-downs in the event of an incident. However, it has been argued that the mere use of technology cannot be relied on for the safety and security of not only Guyana’s marine resources, but also that of the Caribbean’s, given that the developments offshore are likely to impact states nearby.
Recently, the Liza One Permit was renewed to include a parent company guarantee. The Environmental Protection Agency (EPA) in making the announcement said, “…among the notable conditions, the Permit ensures that EEPGL is held liable for all costs associated with clean-up, restoration and compensation for any pollution damage which may occur as a consequence of the project.” As such, under the new permit, EEPGL is also required to “have Financial Assurance which includes a combination of insurance which must “cover well control, and/or clean-up and third-party liability on terms that are market standard for the type of coverage.
This, in addition to “a Parent Company/Affiliate Guarantee Agreement which indemnifies and keeps indemnified the EPA and the Government of Guyana in the event EEPGL and its Co-Venturers fail to meet their environmental obligations under the Permit.”
It was noted by the EPA that “the financial assurance provided must be guided by an estimate of the sum of the reasonably credible costs, expenses, and liabilities that may arise from any breaches of this permit; liabilities are considered to include costs associated with responding to an incident, clean-up and remediation and monitoring.”
A similar clause is included in the Liza Two Permit which states at Section 12.5 that the “Permit Holder must provide from the Parent Company or affiliate companies, one or more legally binding agreements to the EPA, undertakings to provide adequate financial resources to pay or satisfy their respective obligations if EEPGL fails to do so,” however this is yet to be honoured by the developer.
Meanwhile, Vice President Bharrat Jagdeo has assured that his administration is now working with the parent company to secure such guarantee to cover the entire Stabroek Block. “We are working with the companies to secure a parent guarantee that will cover the entire Stabroek Block. Not Liza 1, Liza 2, Payara or Yellowtail, but the entire Stabroek Block,” he said in an interview with a media operative, Eddie Layne back in March this year.
The VP did not disclose figures, or further details regarding the guarantee his government is now looking to secure from ExxonMobil, more than two years post first-oil.
The Peru Oil disaster
Meanwhile, more than four months after the disastrous oil spill in Peru – the Peruvian authorities have sued Spanish oil giant, Repsol, for a total of US$4.5B for the environmental disaster.
On January 15, approximately 12,000 barrels of crude was spilled from one of the La Pampilla refineries, which is owned by Repsol, off the coast of Ventanilla in the region of Lima, Peru.
The spill was reportedly 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 a La Pampilla refinery offshore mooring buoys when a quantity of the cargo was released.
According to a statement by Peru’s National Institute for the Defense of Competition and Protection of Intellectual Property (INDECOPI), a lawsuit was filed before the 27th Civil Court of the Superior Court of Justice of Lima, on behalf of more than 700,000 affected citizens.
Repsol’s Chief Executive Officer (CEO), Josu Jon Imaz had announced that the clean-up and remediation of the spilled crude is expected to cost some US$65 million.
However, Kaieteur News understands that the process in the lawsuit that was filed against the oil giant, allows an abstract valuation of US$3B for the damage caused by the spill and US$1.5B for the non-material damage to consumers, users and third parties.