Insurance companies will refuse to compensate Guyana for oil spill damages as country allowed breach of safety limits - Chris Ram warns

Insurance companies will refuse to compensate Guyana for oil spill damages as country allowed breach of safety limits – Chris Ram warns

May 20, 2024 News

Attorney-at-Law, Christopher Ram

…says Exxon will also deny responsibility as Govt. supports ramp up activities

Kaieteur News – Already tied to what experts describe as the “worst oil deal” known in the petroleum industry, the Government of Guyana (GoG) has allowed U.S oil major, ExxonMobil to push production activIties in the Stabroek Block well beyond the safe operating limits outlined in the Environmental Impact Assessments (EIAs) for the three Floating Production Storage and Offloading (FPSO) vessels in operation.

In the absence of an unlimited parent company guarantee, Guyana is at the mercy of the oil companies, Exxon, Hess and CNOOC, should a major disaster occur. Chartered Accountant and Attorney-at-Law, Christopher Ram is however warning that the insurance company can refuse to compensate the country for any damages as it knowingly allowed the operator to breach safe operating limits.

Ram in an exclusive interview with this publication explained, “In petroleum production, there is a safety margin below the rated productive capacity of a well. Not only is there an increased risk that something can go wrong, but that when it does, the insurance companies will refuse to pay because you have breached the safety limit.”

Furthermore, Ram cautioned that the oil companies too can refuse to accept responsibility since the Government was not only aware of the breached safe operating limits but condoned and supported it.

During his weekly press conference on Thursday, Vice President and Chief Policymaker for the petroleum sector, Bharrat Jageo was asked about the capacity of the Environmental Protection Agency (EPA) to review and approve debottlenecking activities by Exxon, to support the ramping up of production.

The VP explained that it was “safe” as technical officers attached to the regulatory body as well as the Ministry of Natural Resources examine the plans of the operator.

He said that “Last week I dealt with that issue and I said that my briefing is that before they ramped up production beyond rated capacity, that this was cleared with the Ministry. The Ministry assured me their technical officers examined it, I spoke with the EPA, they said they had examined it carefully too so they are aware and it was done with their approval. Both agencies the Ministry of Natural Resources and the EPA and they believe it was done and it’s safe.”

To this end, Ram told Kaieteur News that he does not believe the former President understands the implications and consequences of breaching the safety limit of FPSOs.

Ram argued, “already there are many circumstances and eventualities from which the 2016 Agreement exempts the oil companies from responsibility and liability. These include “indirect, punitive or consequential damages, including but not limited to, production or loss of profits”. Jagdeo’s comments are clearly irresponsible, show recklessness rather than better contract administration and have huge financial implications for the country.”

The Attorney-at-Law was pointed out that Guyana already has a number of wells producing crude oil simultaneously, which he described as “more than enough”. He therefore reasoned, “…if only the President would rein in Jagdeo from his senseless behavior; one oil spill could see the entire Natural Resource Fund exhausted just like that.”

Presently, Liza One and Liza Two are producing about 150,000 bpd and 250,000 barrels per day (bpd) respectively. The EIAs each specifically outline 120,000 and 220,000 bpd, as the safe operating limit for Liza One and Two, respectively. Similarly, the third oil project- Payara- is also producing approximately 230,000 bpd even though the vessel’s nameplate capacity is 220,000 bpd.

Although all three of the FPSOs are currently producing above the respective design capacity, the Liza Unity is poised for further optimization works.

Breach, compensate, Insurance, oil, Ram, ramp-up, spill

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