IN recent weeks, there has been a resurgence of claims made by the former executive director of the Environmental Protection Agency (EPA), Dr. Vincent Adams, regarding oil spill insurance coverage for the offshore developments. The discussions largely centre on unsubstantiated claims by Dr. Adams that he sought and received from ExxonMobil, the operator of the Stabroek block, signed agreements including the EPA permits, committing the company to ‘unlimited liability coverage’, comprising insurance plus a parent company guarantee for coverage of all liabilities above the insurance limit. However, there is more to this issue than what is being represented, as well as some confusion that otherwise can be easily dispelled.
Firstly, to date, Dr. Adams has yet to produce documents that he has claimed exist and has instead sought to proffer from recollection, his accounting of the events and conversations that took place. That is a troubling development since as a former official, his words carry significant weight. In response to those claims, ExxonMobil Guyana’s Media and Communication Manager, Janelle Persaud noted in a widely published letter that no such agreement was signed by Rod Henson, the former President of ExxonMobil Guyana and that “ExxonMobil Guyana and its partners are liable to the government for the obligations of their activities in the Stabroek Block according to all the laws, regulations, and permits in place.”
In an interview last week, current ExxonMobil Guyana President Alistair Routledge reiterated that the company intends to go above its commitments on paper to respond to a potentially disastrous event. “There is no limit to what we would do to respond,” Mr. Routledge told News Room Guyana. Mr. Routledge went on to state that as outlined in the various environmental permits, oil companies are liable for the costs associated with clean-up, restoration, and compensation in the “extremely low” probability of a major incident. “It’s going to be part of our commitment to ensure that we have all controls in place not just to prevent but in the very unlikely event that something happens, we can respond very quickly.”
Oil spill insurance is a standard practice in the industry and Guyana is no different. Each project to be developed offshore Guyana is carefully reviewed and permitted before any activity can take place. Guyana’s first offshore development, the Liza-1, did not have specific requirements for insurance coverage. However, the approved projects since, namely Liza-2, Payara and Yellowtail, clearly define the requirement for insurance coverage and parent or affiliate guarantee. This is in keeping with the government’s promise to securing the ‘best possible deal’ in relation to insurance from Stabroek operator. ExxonMobil Guyana maintains that it has the full insurance coverage that meets the international industry standards required for all its developments in Guyana.
Recently, Vice President Bharrat Jagdeo outlined steps being taken in negotiations to secure as much as US$2 billion in guarantees from the parent companies for the Yellowtail development. The EPA has confirmed that the insurance policies for Liza-1 (renewed), Liza-2 and Payara include coverage of a total of US$600 million per occurrence of a spill event. This is in keeping with continued efforts to improve the permitting process and ensure that Guyana remains a world class producer for decades to come.
Insurance is ultimately just one of many avenues for financial assurance in the unlikely event of a disaster. The first line of defence is always prevention and ExxonMobil maintains it is an industry-leading operator in this respect as a result of reforms made over the past three decades including a dedicated in-house spill response research programme and the company’s focus on operational efficiency. Ms. Persaud outlined in her letter that ExxonMobil Guyana has “established response personnel, procedures, and equipment aligned with the principles of the International Convention on Oil Pollution Preparedness, Response and Cooperation (OPRC), the Caribbean Island Oil Pollution Preparedness Response and Co-operation (OPRC), and the National Oil Spill Response Plan of Guyana. We routinely conduct drills with the Government to ensure readiness.”
Guyana is providing the world with a reliable source of energy, while simultaneously developing its economy and putting in place policy like the Low Carbon Development Strategy 2030 to ensure a secure energy transition. For Guyana, the fast pace of development maximises full benefits within the short horizon to transition away from fossil fuel. The benefits of moving quick are clear: more revenue now, and multiple projects back-to-back mean economies of scale that bring down costs, local companies and industries are growing to support the oil developments and production too. Liam Mallon, president of ExxonMobil Upstream Company recently said regarding the local operations that “[we] are working to maximise benefits for the people of Guyana and increase global supplies through safe and responsible development on an accelerated schedule.”
Ultimately, unsubstantiated claims must be dismissed in the absence of proof. Beneath Guyana’s rapid pace of development is a network of detailed permits, thoughtful negotiation and regulations that govern oil production in the country and ensure a balance between safety and development.