EPA wrapping up discussions on parent company guarantee for Stabroek Block – VP Jagdeo

Apr 14, 2023 News

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By Kiana Wilburg

Kaieteur News – Vice President, Dr. Bharrat Jagdeo confirmed yesterday that the Environmental Protection Agency (EPA) is in the process of wrapping up discussions on a parent guarantee from ExxonMobil Corporation for the Stabroek Block.

During a press conference at the Arthur Chung Convention Centre (ACCC) yesterday, the chief policymaker for the oil industry said he spoke with officials at the EPA before attending the briefing and they confirmed that those discussions are in the final stages. He predicted that it should reach finality in a matter of weeks.

The  vice president was keen to note that he does not want to impose, whether unwittingly or not, any artificial deadlines on the EPA team which could affect its ability to be thorough at the technical level. He did note however that the matter of a parent guarantee, which could be in the vicinity of US$2B, remains a priority for regulators.

Last year, Alistair Routledge who heads ExxonMobil Guyana, had said that his company would be sure to handle what it deems to be eligible costs pertaining to environmental mishaps resulting from its operations. On this premise, Kaieteur News asked the vice president to say how government will treat which such an approach. The official said this is a critical matter that is being addressed by the EPA, adding that it is one of the resolutions that would be handled in the documents pertaining to the parent guarantee.

The vice president said, “We don’t believe Exxon should decide on eligibility” while noting that Exxon is also keen on ensuring that Guyana’s demands for the coverage of costs are not unreasonable. He proffered that government will probably have to find an intermediate step to ensure both sides are comfortable with what would be deemed eligible.

As discussions pertaining to the parent guarantee continue, Dr. Jagdeo said there is a US$600M per occurrence coverage from the Stabroek Block consortium which consists of Exxon’s subsidiary, Esso Exploration and Production Guyana Limited, Hess Corporation and CNOOC Petroleum Guyana Limited. Should any environmental accident require more than the US$600M available, the vice president assured that government has access to EEPGL’s assets which are in the vicinity of US$8B to US$9B.

In a previous interview with this newspaper, EPA Head, Kemraj Parsram assured that the regulatory body is still working to secure a mix of financial assurance to cover the entire oil rich Stabroek Block.

In terms of the oil and gas sector, Parsram had explained that there are various forms of financial assurance. He said the first form, self insurance, is already in the proverbial bag. He said based on EEPGL’s financial rating and its liquidity, it is typical across the globe that self-insurance is accepted as a form of financial assurance. Parsram said regulators can also require insurance similar to an insurance policy which was taken out by EEPGL, the operator of the Stabroek Block.

“…then this third aspect which we are now trying to finalize is the parent guarantee or what you can also call parent company/affiliate guarantee. So these are three forms typically used globally that cover financial assurances. There are other forms such as bonds and letters of credit; they are all in the same bracket but these are the major ones and we are looking at a combination of these three, not one or the other,” expressed the EPA Head.

He added, “So within the current permits, well you don’t have to state the self-insurance, that is a given, and any public document that is available, you can check on the EEPGL as well as ExxonMobil’s financial rating and you can get a sense of their self- insurance and their liquidity and value.”

The EPA Head was keen to note that insurance is already in the permits for the Stabroek Block projects, but talks are ongoing for what is termed “parent guarantee”. He said progress is being made in this regard.

ExxonMobil Guyana had held a briefing with reporters in 2022 where its officials assured that it has the technical and financial resources to address a spill, though it is very unlikely to occur. The company said too that it adheres to an internationally accepted, tiered response system used to determine the requirements of response personnel and equipment.

Exxon Guyana officials had said this system remains aligned with the principles of the International Convention on Oil Pollution Preparedness, Response and Cooperation (OPRC), the Caribbean Island Oil Pollution Preparedness Response and Cooperation (OPRC), and the National Oil Spill Response Plan of Guyana to provide an efficient framework to build preparedness and response capabilities matching the oil spill risks from all types of operations.

“The value of insurance will not limit the company’s ability to respond to an event, and response activities would certainly not be delayed by discussions with insurers. We have the financial capacity to meet our responsibilities for an adverse event and we are committed to paying all legitimate costs in the unlikely event of an oil spill,” President of ExxonMobil Guyana, Alistair Routledge had said.

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• Dr. Bharrat Jagdeo, Environmental Protection Agency (EPA), ExxonMobil, Stabroek Block, Vice President

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