‘No insurance talks for gas-to-shore project’

Aug 18, 2022 News

– despite contracts signed for laying of US$1.3B pipeline – Brokers Association

By Davina Bagot

Kaieteur News – Despite at least two contracts being awarded by oil giant, ExxonMobil for the US$1.3 billion pipeline that is slated to commence construction by year end, the operator is yet to commence talks with the local insurance companies to secure its operations.

President of the Guyana Insurance Brokers Association, Mr. Peter Abdool

President of the Guyana Insurance Brokers Association, Mr. Peter Abdool in an exclusive interview with this newspaper on Tuesday explained that he is unaware of any policy being discussed presently. He noted that if the oil company had reached out to the Insurance Association of Guyana, he most certainly would have been informed. However, Abdool noted that Exxon would have likely approached the Brokers Association first, before initiating discussions with the insurance body.

The Guyana Insurance Brokers Association plays a key role in helping businesses determine the right type of insurance that is suitable for their operations. It functions by understanding the operations of that business and ultimately guides the way in crafting a policy catered to that company’s needs.

An almost upset President of the Insurance Brokers Association told Kaieteur News, “I am sure that they will go the same way as this environmental impact cover that we are talking about now (for the offshore oil operations). It’s going to be in the newspaper rather than being sorted out properly.” He was keen to note nonetheless, “At the end of the day, the cover has to be in place so we are ‘gonna’ [going to] identify clearly, what those bits are.”

When it comes to the importance of insurance coverage for the gas pipeline, as well as the Natural Gas Liquids (NGL) plant and power plant to be set up, Abdool noted, “The government is aware of it and certainly they must know that if something were to happen there, it’s going to be serious.”

The President of the Association was keen to point out that the local insurance companies are competent and have the capacity to offer coverage for gas plants. He explained, “We cover gas plants right now, there are gas plants in Guyana and how are they covered? We cover them. The insurance industry does that, we are capable of putting any kind of cover globally in place.”

On June 30, President Irfaan Ali invited the media over to State House where the key stakeholders in the GTE project were present. He announced that the Government of Guyana has concluded its latest round of negotiations with ExxonMobil Guyana and its Stabroek Block partners on the Gas-to-Shore Energy Project, which will see the project coming in much less than had been previously envisioned. According to the President, with the negotiations now concluded and with the deadline for Request for proposals ending in September, it is expected that contracts would be signed for the project in the last quarter of the year. President Ali in addressing the issue of a final price tag for the project, intimated that while there have been a number of figures being floated, a final cost for the project could not be had as yet since that would be determined through the final bidding process.

So far, Exxon has submitted an Environmental Impact Assessment (EIA) for the project, which highlights that an explosion may be caused by a leaking pipeline. There is also the likelihood of fires and explosions at the NGL and power plant facilities to be manned by the government. However, both parties have been mum when it comes to insuring the project which has been described as the largest financial venture ever pursued by the government.

The arrangement will allow for the oil company to fund the pipeline and Guyanese will pay back those costs through the purchase of electricity generated in the process. The repayment will be done over a 20-year period. Given the metrics involved, citizens have questioned who would take responsibility for a leaking pipeline and if those costs would be billed to Guyana should any damage be caused. These concerns are yet to be addressed.

In the absence of such details for the massive project, and with no insurance talks, Exxon has already embarked on making preparations for the construction of the pipeline. During the last week of July, Exxon entered into an agreement with two companies to aid in the laying of the 190 kilometre pipeline. Subsea 7 and Van Oord were contracted to assist in the project management, engineering, and installation of the natural gas pipeline, with an associated shallow water portion and onshore approach making landfall to the west of the Demerara River, along the coast of Guyana. Subsea 7, according to its website, specialises in subsea engineering, construction and services mainly for the offshore energy industry. The company is registered in Luxembourg with its headquarters in London. Meanwhile, Royal Van Oord is a Dutch maritime contracting company that specialises in dredging, land reclamation and constructing man-made islands.

The following week, it gave out another contract, this time to Technip FMC, a United-Kingdom based firm that provides expertise for subsea and surface projects. According to reports, the company received a “significant” contract to provide engineering, procurement, construction and installation of subsea risers and pipelines for the Wales Gas-to-Energy venture. Though a cost was not attached, it must be noted that a significant contract for Technip FMC is one within the range of $75 million and $250 million. The full contract award will not be included in inbound orders until the project receives a final investment decision and government approvals. It must be noted that the Environmental Protection Agency (EPA) is yet to approve the pipeline aspect of the project, as citizens had objected to the impact assessment the company submitted. Meanwhile, Vice President Bharrat Jagdeo said that the government’s application for the project is currently being vetted by the regulatory body.