21 Guyanese Insurance Companies, Brokers meet to facilitate oil spill insurance

Sep 24, 2022 News

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Kaieteur News – At least 21 local Insurance Companies and Brokers have officially met and submitted information to the Bank of Guyana in relation to oil spill insurance that is supposed to be held in-country.  The local operators were recently tasked by the Central Bank to form itself into a consortium to handle the oil spill insurance that has been announced by the Stabroek Block operators as well as those policies that are expected from other oil companies working here.

President of the Insurance Association of Guyana, Melissa DeSantos, told Kaieteur News on Friday that the Association is currently awaiting a response from the Central Bank for its next move. She told the newspaper that the organisation would have delivered its information within the designated time.  “We had a two week period to respond and  we have sent it in within the timeframe to the authorities and we are awaiting his response,” DeSantos updated. When asked about the specific oil spill policy to be addressed, she said, for now the association has to await the information that will detail what exactly the local agencies will be covering.  “We would know that when we know what the requirements of the policy are that Exxon and all the other oil and gas related companies require.” She clarified, however, that what the local consortium is seeking to do is to facilitate “the placement of all (policies).”

Amid ongoing oil spill conversations with regard to the country’s nascent oil sector and the protection of the environment, the Central Bank, which holds oversight powers over the insurance sector, had asked local companies to come together and discuss how they would be able to manage oil spill insurance in-country as required by law. ExxonMobil and partners had said that it will provide Guyana with US$600M to cover each oil project that comes on stream, along with a US$2B parent coverage that is still to be finalised between the government and the oil companies. Exxon envisions some 10 FPSOs at the height of its investment.

DeSantos had said, however, that the insurance community had already commenced work on what the industry wants to see regarding the insurance. “We do have a model which will involve all players in the industry including insurance companies, as well as brokers so that everyone will benefit from the model that we are coming up with.” As an industry, she said that the participants needed to meet so that everyone is on the same page and aware of what is happening. She said that the meeting that was held was supposed to bring all players up to speed before the association could get back to the Central Bank and “…present him with our official recommendation and the model we would like to go with, pending his approval.”

DeSantos explained too that the model currently being looked at by the local body is basically a consortium of all the companies coming together to be able to form one underwriting pool. And one of the models currently being looked at is the Ghana model where that country has facilitated the pooling of resources by insurance companies to cater for the oil spill insurance there.  The President said that all states that produce oil would have had to come up with models to ensure their industry’s participation. Individually, she had stated, the local insurance industry does not have the capacity to fulfill the coverage, “but our aim is to come up with one model, forming a consortium of all the companies, so everyone could participate and benefit the entire industry.”

Despite the move by the Central Bank to follow up on having the oil spill insurance in country, the view of several stakeholders remain that the policy being provided to Guyana is inadequate, and still not firmly in place despite two working oil fields currently pumping over 300,000 barrels of crude per day.

Commenting  on the recent one-barrel oil spill at the Stabroek Block , Alliance for Change (AFC) point man on oil, David Patterson said, “it highlights the grave dangers Guyana is exposed to, as the country ramps up petroleum production without proof of full liability coverage.”

Moving from “no more than one tablespoon” of crude, as reported by the oil company, to one barrel of oil being spilled, represented a 10,000 percent increase, said Patterson, who noted that the “possibility of a major oil spill is high, and will continue to increase directly proportional to increased oil production.”

Stakeholders have continued to express concern also, over the ability to gain parent company guarantee from Exxon and partners so as to cover any oil spill damage over what the operator, Exploration and Production Guyana Limited (EEPGL) could afford.  While it is insisted that Guyana should seek unlimited liability coverage from the parent company the negotiation now involves the “paltry” US$2B which some persons experienced in the sector say is grossly inadequate compared to the massive amount of oil the country is set to produce, with a new FPSO and project coming on stream every year.

 

 

 

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