Opposition Member of Parliament (MP) and Shadow Oil and Gas Minister, David Patterson yesterday tabled a Motion in the National Assembly calling for liability insurance coverage in the event of an oil spill disaster.
In his Motion, Patterson cited the effects an oil spill can have on Guyana and noted that in the absence of full-coverage insurance, Guyana could find itself in a dilemma. He also highlighted the overwhelming public outcry for government to tie the parent companies of the subsidiaries that are operating in Guyana’s backyard to the much needed insurance coverage.
Since 2015, ExxonMobil Corporation, the parent company of Esso Exploration and Production Guyana Limited (EEPGL), has steered clear of being tied to full coverage insurance for its Stabroek Block projects, which are certain to deliver multi-billion dollar profits on an annual basis. Instead, it has placed only its subsidiary (EEPGL) on the hook if such an eventuality occurs offshore. This is the state of affairs with its Liza Phase One, Liza Phase Two and Payara Projects.
Just recently, ExxonMobil announced that it has commenced oil production at Guyana’s second offshore development area called Liza Phase Two in the Stabroek Block and Guyana is still without full-coverage insurance.
According to a document seen by this publication, in his Motion tabled in the National Assembly, Patterson noted that with the number of floating production storage and offloading (FPSOs) increasing over 10 times by 2026 and oil production offshore Guyana is expected to increase rapidly from its current rate of 120,000 barrels per day (bpd) to almost one million bpd, there is a high likelihood of an oil spill occurring offshore Guyana. In this regard, the Opposition MP pointed out that Guyana’s oil spill response plan is grossly inadequate for such an emergency, cleanup and restoration.
In fact, Patterson stated, “The Liza 1 Permit signed by the current PPP/C appointed EPA Head and issued in June 2017, designates as Permit Holder – Esso Exploration and Production Guyana Limited (EEPGL), a subsidiary Limited Liability Corporation (LLC) of parent companies, ExxonMobil, Hess and CNOOC; and whereas this newly formed LLC, EEPGL does not have any financial assets to cover any oil spill and environmental damage liability.”
He further noted that the 2017 Liza 1 Permit did not contain any provision for full liability coverage, but instead held EEPGL liable for any spill and environmental upset, even though EEPGL does not have any assets to cover any such liabilities.
According to the Motion Patterson tabled, the previous Head of the Environmental Protection Agency (EPA), had corrected the Liza 2 Permit to ensure unlimited liability for all spills including a provision requiring EEPGL’s purchase of the maximum available private insurance offered on the market, with all of the remaining liabilities to be covered by EEPGL’s parent companies – Exxon, Hess and CNOOC. To this end, it was stated that EEPGL had agreed to unlimited liability coverage commitment and urgent purchase of the maximum available private insurance prior to signing the Liza 2 Permit.
However, the MP shared that upon the change of government, the PPP/C administration not only immediately terminated the services of the then EPA Head responsible for forcing the acquisition of unlimited liability coverage but also terminated the services of the EPA attorney who was handling the finalisation of the Agreement, and terminated the discussions relating to the finalisation of the Agreement, which was conditioned on the Liza 2 Permit. This, he said, has resulted in the country being left without liability coverage for a major oil spill, except for US$2.5 billion that was obtained under the previous administration.
After highlighting that the Vice President, Dr. Bharrat Jagdeo, had recently stated that the EPA is currently negotiating with EEPGL to have up to US$2B worth of private insurance, Patterson questioned, “whether the VP is aware of the $2.5B USD coverage acquired under the Coalition, or whether the PPP/C has cancelled that $2.5B USD coverage, leaving Guyana with absolutely no coverage for an oil spill damage that could cost over $70 billion, as was the case with the BP Macondo spill in the Gulf of Mexico.”
Patterson noted too that a major oil spill offshore Guyana would result in the environmental devastation of the country and its neighbouring countries, and can also cause the destruction of the fishing industry, aquatic vegetation, economic bankruptcy, and could possibly include lawsuits from neighbouring countries.
In this regard, he also noted the emergency response and cleanup of the British Petroleum (BP) Macondo oil spill in the Gulf of Mexico has so far cost more than US$70 billion. He further stated that the Peruvian Government recently reported that a major oil company, which is also operating in Guyana had under reported a 12,000 barrels oil spill at its operations in Peru. The company also refused to honour its obligation to cleanup, thus causing grave harm to Peru’s economy and environment.
In closing, he called for government “to recant its decision to cancel the process established in 2017 for obtaining unlimited liability coverage by EEPGL’s parent companies; that the Government return to the already well-established process put in place by the previous administration, which entails guaranteed coverage by the parent companies and that this parliament calls on the Government of Guyana, to include full unlimited liability coverage for oil spills and other disasters related to petroleum production – as a condition for granting approval for the proposed Yellowtail development and all other future petroleum development.”
Patterson is also asking that the “Government of Guyana, conducts an independent analysis on the possible ill effects of an oil spill, and present this report to the Parliamentary Committee of Natural Resources to be used as a reference for all other future oil development submissions if necessary.” The Opposition, he assured, stands ready, able, and willing to assist the government in getting back on track the expeditious acquisition of unlimited liability coverage for an oil spill.
Source: Kaieteur News