Recent oil spill underlines need for full liability coverage – AFC

Sep 18, 2022 News

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…says reliance on oil companies for data must cease

 By Davina Bagot

Kaieteur News – The recent oil spill reported by ExxonMobil highlights the grave dangers Guyana is exposed to, as the country ramps up petroleum production without proof of full liability coverage from the parent company of the Stabroek Block operator, Esso Exploration and Production Guyana Limited (EEPGL).

This is according to Member of Parliament (MP), David Patterson, who during an Alliance for Change (AFC) Press Conference on Friday said the incident confirms the possibility of a major spill occurring offshore Guyana.

He explained, “Exxon previously reported that “no more than one tablespoon” of crude oil has been spilled since the commencement of oil production in Guyana, this amount has now risen to one barrel, by volume, this is an over 10,000 percent increase, this highlights that the possibility of a major oil spill is high, and will continue to increase directly proportional to increased oil production.”

To this end, the Shadow Oil and Gas Minister said, “the AFC once again calls on the PPP to put in place full coverage liability for the petroleum production as is required by the Permits and demanded by almost all private citizens.”

Furthermore, he pointed to the importance of the capacity of the Environmental Protection Agency (EPA) being bolstered as the body is still reliant on the operator for data.

He argued, “It is unacceptable for this agency to be solely relying on the operator for information on spillages and other hazards during oil production operations.

We once again call upon the Government to restore the rigorous oversight that was planned under the coalition and which the PPP/C has irresponsibly scrapped to the detriment of the nation.”

Patterson explained that a key 36-member Oil and Gas Unit that was developed by the World Bank and the EPA through a US$1 million loan by the financial institution was dismantled. One component would have allowed for the team to be present on the Floating Production Storage and Offloading (FPSO) vessel 24/7 to obtain real time and accurate information.

In the absence of these skilled personnel, the MP said the EPA has been relying on and accepting information solely provided by Exxon.

“As may be recalled, when this plan was brought to the PPP/C’s attention, they denied it ever existed but when confronted with the document, the EPA Director claimed he didn’t know about it, since he wasn’t there when it was prepared- surprisingly Minister (of Natural Resources Vickram) Bharrat contradicted the EPA Director by saying that the plan is being executed,” Patterson said.

He told reporters, “It is time for the Government to stop playing Russian roulette on this most important matter.”

Last Saturday, the oil giant said the team on the Liza Unity FPSO observed a sheen on the water in the vicinity of the vessel on September 9, last.

According to the oil company, initial investigations indicate that about one barrel of crude was released during a maintenance activity on the vessel. Further, the activity was immediately halted and the leak was cut off.

Exxon explained, “Additional surveillance by helicopter confirmed that there was no sheen in the area; only a light sheen was perceptible approximately 20 km (13 miles) North West of the vessel. By midday on September 10, a support vessel in the area confirmed no further sign of a sheen.”

Patterson had submitted a Motion to the National Assembly in February of this year seeking full unlimited liability coverage for oil spills and other disasters related to petroleum production, but the government voted against this request.

In shutting down the Motion, Minister of Natural Resources Vickram Bharrat said that the administration is aware of how devastating an oil spill can be, hence provisions have been made to ensure such an activity does not occur. Even if it does, he assured that the oil company has been required to import a capping stack to lay on standby, in the event of such an occurrence. A capping stack is a piece of equipment that is used to place over a blown out well as a cap to prevent further damage that may have been caused.

The other MPs in their arguments insisted that full liability coverage would drive up the project cost and even chase investors away from Guyana.

This newspaper has been on the forefront, highlighting the need for full liability coverage in the event of an oil spill. Even though this is a requirement in the Production Permits, ExxonMobil is yet to produce proof of a letter in which it agrees to cover damages that the limited insurance policy does not compensate for.

Instead, the company has explained that its subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), which operates the Stabroek Block, owns assets valuing over US$5 billion.

More importantly, the oil company assured that there is US$600 million that has been put 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.

This means, however, that the immediate clean up finances could only amount to US$2.6 billion, meaning Guyana could be left to foot the additional charges that may be associated with an oil spill.

In fact, 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.

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