No one has ever seen, known what Guyana US$600M oil insurance policy is about - Sources

No one has ever seen, known what Guyana US$600M oil insurance policy is about – Sources

Aug 05, 2022 News

By Zena Henry

Kaieteur News – While the conversation regarding financial protection for Guyana against oil spills rages on, citizens are not only in the dark about the actual existence of the insurance policy, but sources have confirmed that the coverage is not in-country as is legally required.

Exxon oil spill response training

Given their operations offshore Guyana, oil companies are required to have the necessary insurance coverage to provide the finances that is necessary to support clean up action. Additionally, this policy is supposed to be in-country, former head of the Environmental Protection Agency (EPA) Dr. Vincent Adams had stated. He had explained that moves were being made to not only have a reasonable oil spill policy available to Guyana, but that the policy was being prepared to be in-country since a local representative would have to be the broker for the oil spill coverage.

However, Kaieteur News understands that to date, the policy is not available here. The newspaper was told that based on the law, Exxon Mobil and its affiliates are prevented from having the policy overseas, and that, “it has to go through a local company.” This move is called “fronting”, where the oil company passes the policy through a local broker, allowing for some in-country handling of the service, the newspaper was told. As such, “the law does not allow for the insurance to be directly held overseas. It has to go through a local company,” the information stated. It was noted too that any policy involving a foreign company has to be with a locally registered company. “There is no information however as to who has the insurance policy or where it is located and my information is that it is not being done here,” the well placed sourced advised.

Outside of this, Kaieteur News was reminded nonetheless that local insurance companies may not be able to accommodate the size of the oil spill policy thus supporting the possibility of the coverage being outside of Guyana. It was clarified however that despite local companies’ abilities “fronting” is still the option that meets the legal requirements in relation to having the policy represented by a local company. “So even if the hefty policy is outside of Guyana, it must be represented by a company registered locally.”

Guyana is said to have US$600M for each oil production project led by ExxonMobil affiliate, Esso Exploration and Production Guyana Limited (EEPGL) offshore Guyana. EPA’s current CEO told the media last April that there is a ‘per occurrence’ insurance coverage in case of the unfortunate situation. But to date, Guyanese have not been told where this insurance is located and with whom. Additionally, a bigger argument exists where stakeholders have expressed concern over the value of the oil spill policy given the “industry-leading” pace at which the country is developing its oil fields.

Shadow Minister with responsibility for oil and gas, David Patterson, just over a week ago sought to have the National Assembly agree on having unlimited liability coverage for the oil sector here, which includes parent company coverage pass any expenses the operator may not be able to cover. Patterson highlighted during his contribution to the oil coverage debates, that there will also be additional threats of oil spills off Guyana’s coasts. He point out that “the emergency response and cleanup of the British Petroleum Macondo oil spill in the Gulf of Mexico have so far cost more than $70B USD and still counting, but inexplicably, the Vice President of Guyana (Bharrat Jagdeo) has been waffling all over the place changing his tune from a $2B insurance from Exxon, to parent company assurance, to now peddling a piddly $600M insurance coverage which is less than one percent of the cost of the Macondo spill.”

Adams, who has been extremely vocal over the local insurance policy, as well as other stakeholders have called on the government to present the public with the relevant information associated with the policy. Adams continues to challenge the President of ExxonMobil Guyana, Alistair Routledge, to show the country precisely how much insurance the nation has, from the company, to cover costs associated with the dreaded eventuality of an oil spill. Adams claimed that he was able to get former Exxon boss Rod Henson to commit to parent company coverage and oil spill liability, but the arrangements were not completed ahead of his departure from the agency. He said that he was also able to get the former head to commit to US$2.5 coverage, but Routledge has so far denied these claims.