Peru proposes guarantee fund against future environmental disasters

Aug 18, 2022 News

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In wake of oil spill…

Kaieteur News – Peru’s Minister of Environment, Modesto Montoya, on Monday announced that his ministry has prepared a legislative proposal for the creation of a guarantee fund against environmental disasters.

This move by the minister comes seven months after approximately 12,000 barrels of crude spilled from an oil refinery in Peruvian waters. Minister Montoya stated that his sector will prepare a legislative proposal for the creation of a guarantee fund in the event of eventual environmental disasters. He said once set-up, every company must sign on to the facility before they can start production. “The regulations that we have inherited as a country do not allow us to be more drastic, that is, we have practically received a handcuffed State, which allows polluting and irresponsible companies to do what they are doing.” The Peruvian minister specified that the aforementioned Bill will be sent to the Council of Ministers for approval.

Notably, his new move is added to the many action Peruvian authorities had to take against Spanish oil giant, Repsol, the owner of the refinery. Repsol is one of the companies operating here in Guyana. In late July, it was reported that the company was still to honour its obligation to remediate the effects of the oil spill in Peru.

It was on January 15 last that thousands of barrels of crude were spilled from one of the La Pampilla refineries off the coast of Ventanilla in the region of Lima, Peru.

In giving a recent update on the status of the contaminated areas, Minister Montoya stated that based on an assessment done by Peru’s Environmental Assessment and Control Agency (OEFA) revealed that the cleaning of 13 sites (10 beaches and 3 points) has been verified, which are free of hydrocarbons, while 27 sites (25 beaches and 2 points) are still affected by said contaminant element. He added too that 57 sites (beaches, cliffs, points and mouths) are still in the evaluation process.

Despite Repsol is blaming the environmental disaster on shock waves from an undersea volcanic eruption near Tonga in the South Pacific Ocean – the spill triggered a flurry of accusations and several Peruvian officials called for the oil company to be held accountable.

To date, the country had to impose several fines on the oil giant for non-compliance in the remediation of the environment.

The first action taken against the company was by Peruvian judge, Romualdo Aguedo, on January 28, 2022, who granted an order to prevent four Repsol’s executives from leaving the country. Judge Aguedo has imposed an 18-month ban on the grounds of the potential risk that the officials might leave Peru and not honour their obligations in the country.

In January, the Peruvian government had suspended the company’s hydrocarbon loading and unloading activities. Subsequently, a fuel shortage in Peru forced the country to lift the suspension on Repsol’s operation temporarily. Repsol was only allowed to continue its operations for 10 days and under supervision from the OEFA – that operation has come to an end.

The oil spill not only affected the environment, but it also disrupted the livelihood of Peru’s artisanal fishermen. As such, the Peruvian government had ordered the oil giant, to pay a total of US$1400 compensation to each citizen affected by the spill. The government took the aforementioned route since a legal process for compensation to the affected families would take a long time.

Nevertheless, in May, the Peruvian authorities filed a lawsuit against Repsol, for a total of US$4.5B for the environmental disaster. The lawsuit was filed by National Institute for the Defense of Competition and Protection of Intellectual Property (INDECOPI) a government agency, on behalf of more than 700,000 affected citizens.

INDECOPI filed the lawsuit before the 27th Civil Court of the Superior Court of Justice of Lima, and the litigation commenced in July. Peru’s fight to get the oil company to take responsibility for the environmental disaster – comes even as the Guyana government recently threw out a Motion that was seeking full liability coverage from oil companies for oil spills.

Despite promising to press ExxonMobil Guyana (Esso Exploration and Production Guyana Limited) on the issue to have the parent company (ExxonMobil) for the Guyana Operations sign on to binding full coverage insurance, the Irfaan Ali led PPP-administration has shifted that responsibility to the Environmental Protection Agency (EPA).

In July, a four-hour long debate on a Motion seeking full liability coverage for oil spills ended with the Motion being thrown out by the government.

The Motion that was filed by Opposition Member of Parliament (MP), David Patterson, who sought to not only include unlimited liability coverage for oil spills and other disasters related to petroleum production but also to direct the Government to conduct an independent analysis on the possible ill effects of an oil spill, and present this report to the Parliamentary Committee on Natural Resources to be used as a reference for all other future oil development submissions.

While the Government of Peru has to take legal action against and continuously fight for Repsol to honour its duties – Guyana in contrast, continues to give ExxonMobil permission to operate without a guarantee that it would cover the cost for any oil spill that surpasses the capacity of its subsidiary to pay.

In February last, ExxonMobil announced that it has commenced oil production at Guyana’s second offshore development area called Liza Phase Two in the Stabroek Block. It would be poignant to note that with the coming onstream of the Liza Phase Two operations, the country now has an installed production capacity of some 360,000 barrels of oil daily.

This is from the two Floating Production Storage and Offloading Vessels—Liza Destiny and Liza Unity—currently operating in the prolific Stabroek Block. Additionally, the operations are being undertaken, producing 360,000 barrels of oil daily (bpd) in Guyana without full coverage insurance in case of a spill domestically.

 

 

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