Exxon US$600M insurance also covers ‘parent company’ obligations

May 21, 2024 News

Kaieteur News – With hundreds of wells being spud in Guyana’s Exclusive Economic Zone, particularly the ExxonMobil Guyana Limited (EMGL) led consortium presently producing crude from three fields in the Stabroek Block and three more already sanctioned, the matter of insurance has taken on even greater importance.

With the public clamour for the release of information related to insurance protections in place in the event of an oil spill offshore, government recently published the most recent one-year Insurance Contract put in place by the oil major, up to the tune of US$600M.

It should be noted however that under the terms of the contract, the insured or beneficiaries are extended to not only sub-contractors of the company, but its Houston Based, Parent Company.

This much, can be gleaned in the document that were listed under definitions for those insured under the arrangement, at A (II) “the named insured’s parent and/or associated and/or affiliated and/or subsidiary and/or interrelated, owned or controlled.”

Additionally, the policy also covers any person to whom the insured is obliged by virtue of a written contract entered into before any relevant Accident. Other categories catered for under the insurance policy under the definition for insured, include, any director, stockholder, partner, or employee of the insured. This in addition to consultants and joint venture partners.

According to the policy up to US$100M would be available for legal liabilities arising out of all the insured operations as scheduled in relation to the scheduled operations.

Additionally, US$500M is to be made available for the Operator’s Extra Expenses, meaning “expenses extended to include unlimited redrill and restoration costs, extended redrilling and restoration cost, deliberate well firing, making wells safe, evacuation expenses, care, custody and control, underground control of well, pollution from properties, removal of wreck and/or debris, social responsibility coverage.”

These policies extend to a single occurrence or event, with the caveat should the US$500M not be enough, then the US$100M would fill in the gap, bringing the coverage to US$600M.

For the purpose of the police, an occurrence is defined to mean “one accident, loss, disaster or casualty or series of accidents, losses, disasters, or casualties arising out of one event or continuous or repeated exposure to conditions which commence during the Period of Insurance of this policy and which cause physical loss, physical damage or destruction.”

Additionally, the Policy also caters for any amount of such damage or destruction resulting from a common cause, or from exposure to substantially the same conditions, or all heavy weather damage to vessels occurring during a single sea passage between two ports shall be deemed to result from one Occurrence even though some of the losses making up the Occurrence may occur after expiration or cancellation of this policy. It should be noted that the High Court had mandated EMGL, formerly Esso Exploration and Production Guyana Limited (EEPGL), to provide an unlimited parent company guarantee to shield the nation from the financial burdens of an oil spill. High Court Judge Sandil Kissoon had ordered, among other things, that an ‘unlimited’ parent guarantee be provided by ExxonMobil Guyana, based on his examination of the permit.

The ruling was had in a matter brought against EMGL by litigants, Godfrey Whyte and Frederick Collins, on May 3, 2023.

The matter has since been appealed by government, with the Caribbean Court of Justice recently ruling in favour of the administration to be a party to the case.

Exclusive Economic Zone, ExxonMobil, Insurance, obligations, spill

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Exxon US$600M insurance also covers ‘parent company’ obligations

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