THE Environmental Protection Agency (EPA) is in the final stages of concluding the parent guarantee from the operator of the Stabroek Block to fully cover expenses incurred in any eventuality of an oil spill offshore.

This is according to Vice President, Dr. Bharrat Jagdeo, who, during a press conference on Thursday last, related that the matter is expected to be resolved within a few weeks.
“I spoke with the EPA before I came here and so they said they’re in the final stages of concluding the parent guarantee. So, they are working on it and I anticipate it will be a matter of weeks before they conclude but they said to me they’re almost finalised,” Dr. Jagdeo explained.

“I don’t want to put any pressure because, at the technical level, I don’t want them to say I’m pushing artificial deadlines on them and they didn’t get that chance at a technical level to go through it carefully. So, I’m not putting any deadline on them but they said to me they are a matter of weeks away from getting the parent guarantee.”

A parent company guarantee (PCG) is a contract between a company and its client to ensure a performance requirement is met. These agreements are used when a contractor or subsidiary enter into a contract with clients. The expectations outlined in this guarantee are detailed by the parent company. The document that outlines a parent company guarantee should clearly state that the parent company is only held liable if the contractor or subsidiary company is in breach of the contract and fails to correct the breach in question.

The environmental permit granted to the oil and gas operators provides that holders are liable for the full extent of any environmental damage caused, and cleaning up needed, for any oil spill that may occur.

Dr. Jagdeo noted that concerns by the operators as it pertains to who gets to determine the validity of damages claimed as a result of an oil spill is being worked out.

“That’s one of the last issues on this parent guarantee resolution that they are going to resolve shortly,” Dr. Jagdeo said.

The Vice President noted that while the oil company is opposed to the government being the final adjudicator of which claims are valid and which are not, vice versa, the government is not comfortable with the oil company having the final say.

“We don’t believe that Exxon should decide on the eligibility but they are saying we can’t also decide. So, you probably have to find an intermediate step to make sure that it’s assessed and with a party that both sides are comfortable with. So that is a critical issue for us,” Dr. Jagdeo noted.

Currently, each oil production project being developed offshore by Exxon Mobil affiliate, Esso Exploration and Production Guyana Limited (EEPGL), has oil spill insurance coverage of up to US$600 million per event, while the full liability is supposed to be backed by Exxon’s parent company guarantee.

The EPA has been working with the operators to secure the parent guarantee. The Stabroek Block is owned by Exxon and its partners Hess and CNOOC.

However, Dr. Jagdeo noted in the past that Guyana has the necessary capabilities to deal with a potential oil spill from offshore the oil and gas production.

Aside from the US$600 million insurance, the company also has over US$6 billion in assets in the country that can be used to cover required finances.