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New PSA must hold parent companies liable for oil spills – Opposition
Kaieteur News – The current Production Sharing Agreement (PSA), which the Guyana Government entered into with ExxonMobil Guyana and its partners, give the oil companies leeway to self-insure the offshore operations.
Economist Elson Low
This means that the oil companies are allowed to set aside an amount they believe is enough to cover any accidents that may occur during oil production rather than pay for a premium. This loophole however is one of the key features the A Partnership for National Unity + Alliance For Change (APNU + AFC) Opposition believes should be plugged in any new oil contract.
This is according to Economist Elson Low, who serves as the Opposition Leader’s Economic and Youth Policy Adviser. Low in a recent telephone interview with Kaieteur News, was at the time outlining some of the Coalition’s plans for new PSAs when he highlighted full liability coverage as a key area of focus. He explained, “There is a serious concern regarding the insurance issue and so we believe that the parent companies must be held liable in any future PSA regarding full liability coverage for any oil spill or any sort of related environmental accidents.”
The subject of a new Production Sharing Agreement or oil contract recently took the spotlight as the country gears for an auction of the remaining oil blocks by year end. The current oil contract merely ties Exxon’s limited liability company, Esso Exploration and Production Guyana Limited (EEPGL), to damages that “may be brought or made against Government by a third party by reason of negligence (any act or omission or reckless disregard of harmful consequences which results in damage to a third party) by the contractor or the operator…” This is so according to Article 2.4 of the 2016 PSA.
Authorities join efforts to clean up a spill in Peru
Further, the contract states at Article 20.2 (b) “Subject to the Minister’s approval, which shall not be unreasonably withheld, the Contractor, notwithstanding the provisions of Article 20.2 (a), shall have the right to self-insure all or part of the aforementioned insurances in Article 20.2 (a).”
It must be noted that this agreement was signed under the then Coalition Government, by AFCs Raphael Trotman, and Leader of the AFC Party, Khemraj Ramjattan and who said the deal was signed at a time when Guyana was in need of a new revenue source. In recent times, he has acknowledged the need for a renegotiation of the contract, after being a stern defender of the deal.
More importantly, ExxonMobil Guyana has said that there is a US$600 million set aside by the Stabroek Block operators to cover oil spills per disaster in the rich Stabroek Block, where presently production has surpassed 300,000 barrels per day. In addition to that, it was reported that a US$2 billion parent company guarantee is being negotiated with the Environmental Protection Agency (EPA).
Experts and environmental activists have questioned this sum in light of recent oil spill accidents. In Peru for example where only 12,000 barrels of crude was spilled offshore, Repsol- the Spanish operator of the block- has been slapped with a US$4.5 billion lawsuit. It was on January 15, last when thousands of barrels of crude were spilled from one of Repsol’s La Pampilla refineries off the coast of Ventanilla in the region of Lima, Peru. It happened when an Italian-flagged tanker, Mare Doricum, was unloading at one of Repsol’s refineries. The spill contaminated Peruvian waters, blackened several of the country’s beaches and disrupted the livelihood of artisanal fishermen.
As such, in May, Peru’s Consumer Protection Agency, National Institute for the Defense of Competition and Protection of Intellectual Property (INDECOPI) approached the 27th Supreme Court of Peru and filed a civil lawsuit and is seeking US$3 billion for environmental damage and US$1.5 billion for damages to locals and consumers.
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