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Guyana pays for ExxonMobil’s oil spill insurance – PSA reveals
Kaieteur News – Vice President, Dr. Bharrat Jagdeo told no lies when he recently described the 2016 Stabroek Block Production Sharing Agreement (PSA) as a “sh*tty deal.” But as crass as it may seem, the phrase does not begin to portray the frightening game of Russian roulette the country is playing with ExxonMobil Corporation on matters of insurance for oil spills.
According to the PSA, there are a number of unbelievable items Exxon can recover without needing permission from the Government. One of these pertains to insurance. The contract says on Page 11 of Annex C that, “Insurance premium and cost incurred pursuant to Article 20, provided that if such insurance is wholly or partly placed with an affiliated company of the parties comprising the contractor, such premium and costs shall be recoverable only to the extent generally charged by competitive insurance companies…”
It goes on to state that, “costs, losses, and damages incurred to the extent not made good by insurance are recoverable including costs, losses or damages resulting from indemnities unless such costs have resulted solely from an act of willful misconduct or gross negligence of the contractor.”
Two matters are therefore clear: Guyana ultimately pays for its own clean-up costs unless it can prove in court that Exxon is utterly at fault. And in the meantime, Exxon is allowed to recover in full, all insurance costs taken for the country’s protection. 
For the time being, the Environmental Protection Agency (EPA) said last year that a US$600M insurance policy is in place to cover costs related per oil spill. A parent guarantee from ExxonMobil Corporation is still in the discussion stage.
With Exxon already in pursuit of its sixth project, set for commencement in 2027 to 2028, several stakeholders have underscored the need for Guyana to have full coverage insurance from Exxon and its partners. They are also of the firm conviction that Environmental Permits should be armed with provisions that close the loophole for insurance costs to be recovered.
It is difficult for many transparency advocates to understand why the government of the day has not moved with alacrity on this matter when its CARICOM counterparts have taken a no-nonsense approach to the matter.
Over in Suriname, the Dutch-speaking nation has made it a practice to only accept full coverage insurance from the parent companies operating in its backyard. In fact, oil companies are only allowed to dream about recovering such costs.
Confirming as well as elucidating this industry requirement in a previous interview was former head of Staatsolie (Suriname’s National Oil Company), Mr. Rudolf Elias. During one of his appearances on Kaieteur Radio’s programme, Guyana’s Oil and You, Elias noted that Suriname authorities always engage the parent company on insurance.
Elias said, “…Even if it is the daughter of the daughter of the daughter of the daughter, in the end, the parent company will have to take full responsibility…So it is always good to have the mother company be the guarantor for an event of an oil spill.”
While Suriname has made it a non-negotiable position to have parent companies provide insurance that cannot be recovered, in Guyana, the circumstances remain vastly different, leaving many to wonder—who really calls the shots in Guyana’s oil sector?
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