Latest update March 27th, 2026 12:40 AM
Govt. closes dangerous oil-spill insurance loophole in new PSA
…blocks oil companies from self-insuring after major liability concerns
(Kaieteur News) – A dangerous loophole that existed in the 2016 Production Sharing Agreement (PSA) has been corrected by the government of Guyana (GoG) in the new oil deal it has inked with French oil giant, Total Energies.
The PSA, published by the Ministry of Natural Resources (MNR) days after the contract was signed reveals that the company will not be allowed to self-insure the operations.
Minister of Natural Resources, Vickram Bharrat
Insurance agents say self-insured oil companies keep the risk themselves and are also responsible for paying liabilities and losses incurred through their operators. The problem with that is that sometimes liabilities from operation mishaps could be so huge that it surpasses the capabilities of the affiliates or captive companies, created by the oil companies to cover their policies. Governments are then left saddled with huge bills in cleanup cost, liabilities among others, and in many cases, end up in court fighting with oil companies to have them address the issues caused by their operations.
Outside of this, taxes are lost when the oil companies are able to keep the risk because local companies are not involved in the multi-million-dollar arrangements, so there is nothing to be gained by the government. All the ceding commissions, premiums and other revenues garnered from the placement of the policy is received by the oil companies’ captives and affiliates outside of Guyana.
There is also the loss of risk management scrutiny and best practices. Third party commercial insurers are said to keep rigorous levels of risk management and could cancel coverage if conditions of policies are not adhered to.
Stringent checks and balances are conducted to ensure a properly placed coverage. Operators say that without their involvement Guyana’s ability to say whether the oil companies are using best practices and managing risk appropriately is almost non-existent.
Notably, the 2016 deal allows ExxonMobil to self-insure, one of many flaws imbedded in the contract and highlighted by this newspaper over the years.
Government has however addressed this major loophole and has made it clear in the new PSA that oil companies will not be allowed to unilaterally self-insure.
Article 29.3 (f) states, “The Contractor shall not self-insure nor insure through Affiliated Companies without the specific prior written approval of the Minister.”
Additionally, the renewed contract now names the GoG as an insured party on the policy. Insurance for ExxonMobil’s Stabroek Block operations only named the contractor and its co-venturers as insured. This means that the companies would have been compensated for the damaged assets and other losses in the event of an oil spill disaster while Guyana could have been left on the hook for expenses related to cleanup and restoration.
The new oil deal was signed with the Total Energies-led consortium on November 11, 2025. The company has been awarded block S4, located in shallow water, offshore Guyana. The French company leads the consortium with a 40% interest in the block, along with its partners, Qatar Energy and Petronas with 35% and 25% respectively. Block S4 spans an area of approximately 1,788 square kilometres, located 50 to 100 kilometres off Guyana’s coast in water depths ranging between 30 and 100 metres.
Government indicated in its 2025 Mid-Year report that it anticipates signing another two oil contracts before the end of the year.
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