VP Jagdeo says: ‘Too early to think about insurance for US$1.3B gas pipeline’

Aug 20, 2022 News

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Kaieteur News – Vice President Bharrat Jagdeo believes it is “common sense” for the total cost of the Gas-to-Energy (GTE) to be decided on before any insurance policy is pursued, even though he has calculated the financial viability of the project in the absence of that very final cost.

During a three-hour long press conference on Friday at the Arthur Chung Conference Centre, Liliendaal, Georgetown, he debated the need for insurance, prior to the pipeline becoming operational.

In responding to a question by this newspaper on whether the People’s Progressive Party (PPP) has entered into discussion with ExxonMobil Guyana for the pipeline aspect of the project, which is estimated at some US$1.3 billion, Jagdeo stammered, “How we gonna do, it’s like how you gonna start the insurance, first of all the people are gonna say, the insurers, where is this pipeline? Have you built this pipeline, no. We are now procuring material. We are procuring the material to start laying of it. We are now mapping the route; we are still mapping the route. We are completing the environmental studies and we have to put in place, they’d say well when you have done that, when you know the final cost then we can talk about insurance.”

He insisted, “It’s reasonable. It’s common sense. You can’t not know the cost of the total pipeline as yet and seek to insure it. You understand. If you have a house and you build a house for $20 million, you don’t know the house, you start the foundation and you go to the insurance company, they’d say what are we insuring?”

Earlier, Jagdeo was asked if the government is also considering any of the risks in its analysis of the project and conclusion that it will be viable. To this end, he acknowledged that while the possibility of an explosion exists, it simply does not change the commercial viability of the US multibillion-dollar project.

According to him, “With a power plant at Kingston, we could have an explosion. That’s not an excuse for not building a power plant. Billions of gigawatt hours are generated from gas projects in the world so you would have to have a mitigation plan for everything… in an event of that nature to address it but that doesn’t change the commercial viability of the project and so we are not skimping corners on safety provisions.”

Jagdeo assured that there will be no shortcutting of the safety provisions in this project, yet when he was asked about a Gas Leak Management Plan (GLMP) for the pipeline, his excuse was, “We have probably about a year and stuff like that. Over a year before we actually bring the gas in, it’s 2024.” Experts have argued that this document should be inserted in the developer’s Environmental Impact Assessment (EIA). However, Exxon has already filed that study with the Environmental Protection Agency (EPA) without addressing this risk. As such, former EPA Head, Dr. Vincent Adams had questioned, “How does it make sense that the highest hazardous risk is a leaking pipeline but it is not addressed in the EIA?” He was keen to note that this GLMP must also consider natural disasters which can potentially cause damage to the pipeline. “Are you looking at earthquakes below the ocean? Volcanoes, are you looking at mudslides below the ocean in terms of damaging the pipeline? You have to look at that and then you got to cater for that to say the pipeline may rupture so how are you going to address that? You have to say if you are going to monitor that remotely, so you have to address that in the EIA.”

VP Jagdeo is however adamant that securing insurance for this project up front just does not fit into the sequence in which the steps should be taken. In fact, he told this newspaper: “It seems as though you just want a plan” and “you just have to find stories to write because it doesn’t sound logical to me” since “if you don’t build the house as yet how you gonna get insurance?”

He also pointed out that the objective is for Guyana to own the pipeline eventually and that the contractor’s cost to put in the structure will be repaid by the citizens of Guyana through their monthly electricity bill. Given that the estimated US$1.3 billion expense will ultimately be on the backs of Guyanese, citizens have been questioning whether this investment will be safeguarded with a sound insurance policy.

It must be noted too that seven years after oil was first discovered in Guyana, the country is yet to secure full liability coverage from the parent company, ExxonMobil, which is only ready to offer a US$2 billion guarantee if its subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) fails to cover the costs associated with a spill.

Gas leak impacts
Though gas leaks, and worse yet, explosions or fires are all listed as likely ‘unplanned events’ that can take place, as a result of the pipeline, the oil company has completely glossed over how it would respond to such a disaster in its EIA. In an earlier article, this newspaper reported that gas releases from the planned GTE project can result in explosions which can pose grave risk to human and environmental health.
In the EIA document, the developer explained that a loss of integrity of the offshore pipeline, resulting in a natural gas release can be caused due to corrosion, objects striking the pipeline, and a buildup of stress in the pipe wall, causing buckling. The EIA goes on to say that if an unplanned release of gas from damaged subsea pipelines occurs, the released gas will generate a gas plume that rises from the seafloor to the sea surface. Therefore, “Fire or explosion accidents can occur when the released gas disperses into the atmosphere and encounters ignition sources, which could have an adverse impact on human life and environment in the immediate vicinity of the fire.” Exxon’s Consultant added that the consequences of a release would likely be less severe offshore as it “is extremely unlikely that there will be an ignition source to cause a fire, and the gas will passively disperse without affecting any resources” rather than an onshore occurrence. However, a release close to the Floating, Production, Sharing and Offloading (FPSO) vessel could result in a fire onboard the FPSO. Exxon said that to reduce the likelihood of a gas release, the offshore pipeline design and installation will vary depending on the pipeline depth.

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