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Warning that a major oil spill offshore Guyana would result in the environmental devastation for this country and its neighbours resulting in possible lawsuits, A Partnership for National Unity + Alliance For Change (APNU+AFC) Member of Parliament, David Patterson tabled motion in the National Assembly calling on the Government to reverse its decision to terminate the process for obtaining unlimited liability coverage by Esso Exploration and Production Guyana Limited’s (EEPGL’s) parent companies, ExxonMobil, Hess and CNOOC.
Patterson, who served as Minister of Public Infrastructure under the APNU+AFC Administration, said the unlimited liability coverage is necessary at a time when oil production offshore Guyana is expected to increase rapidly from its current rate of 120,000 barrels per day (bopd) to close to 1 million bopd, with the number of FPSOs increasing over 10 times by 2026.
“… worldwide offshore oil production operations show a high likelihood of an oil spill occurring offshore Guyana, and that such likelihood of a spill increases exponentially with the rapid increase in offshore production activities,” Patterson said in one of the whereas clauses while adding that the country’s oil spill response plan is grossly inadequate for such an emergency, cleanup and restoration.
He pointed out that emergency response and cleanup of the British Petroleum Macondo oil spill in the Gulf of Mexico have thus far cost more than US$70B while the Government of Peru recently reported that a major oil company operating in Guyana under reported a 12,000-barrel oil spill at its operations in Peru, and then refused to honor its obligation to clean it up, thus causing grave harm to Peru’s economy and environment.
“a major oil spill offshore Guyana would result in the environmental devastation of Guyana and its neighbouring countries, obliteration of the areas fishing industry, aquatic vegetation, and economic bankruptcy, including possible lawsuits from neighbouring countries,” the Opposition MP warned.
He said while the 2017 Liza 1 Permit issued to EEPGL did not contain any provision for full liability coverage, under the APNU+AFC Administration the Liza 2 Permit was corrected to ensure unlimited liability for all spills by including a provision requiring EEPGL’s purchase of the maximum available private insurance offered in the market, with all of the remaining liabilities to be covered by EEPGL’s parent companies – Exxon, Hess and CNOOC.
“… EEPGL agreed to the unlimited liability coverage commitment in the Liza 2 Permit and urgent purchase of the maximum available private insurance prior to signing the Permit,” Patterson said.
EEPGL, however, requested a concession for the Environmental Protection Agency (EPA) to sign the permit in order to maintain the confidence of its investors, conditioned upon giving EEPGL time to negotiate an agreement amongst its parent companies on how those liabilities would be shared amongst the companies.
As such, time was granted for the EEPGL to negotiate an agreement amongst its parent companies to ensure unlimited liability coverage.
“… EEPGL timely obtained the maximum $2.5 Billion private insurance available on the market prior to EPA signing and issuing the Liza 2 Permit in April 2019… EPA’s and EEPGL’s Attorneys held frequent meetings from May 2019 until the PPPC took office, to discuss several drafts of the agreement amongst the parent companies, and were close to finalizing the Agreement at the time that the PPPC took office,” Patterson explained.
It was noted, however, that the change in Administration in August 2020 not only resulted in the immediate termination of the services of the then EPA Head responsible for forcing the acquisition of unlimited liability coverage, but also termination of the services of the EPA Attorney handling finalization of the agreement.
“… immediately following the termination of the then EPA Head and EPA Attorney handling the finalization of the parent companies’ agreement to have unlimited liability coverage, the PPP/C also terminated the discussions relating to the finalization of the agreement, which was conditioned on the Liza 2 Permit,” Patterson detailed in one of the whereas clauses.
According to him, the move left the country without any liability coverage for a major oil spill, except for the US$2.5B obtained under the APNU+AFC Administration.
“… there has been an overwhelming public outcry from the likely affected populations of all walks of life in Guyana, the Caribbean region, and other international stakeholders for a guarantee of full liability coverage for the cleanup of any oil spill offshore Guyana,” he said.
Vice President, Bharrat Jagdeo has since indicated that the EPA is currently negotiating with EEPGL to have in place US$2B private insurance.
He therefore want’s the Government to recant its decision to cancel the process already established in 2017 for obtaining unlimited liability coverage by EEPGL’s parent companies.
“… Be it further resolved 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,” a section of the motion reads.
Additionally, the Opposition MP is calling for the Government to conduct an independent analysis on the possible ill effects of an oil spill, and present a report to the Parliamentary Committee of Natural Resources to be used as a reference for all other future oil development submissions.
Through the motion, Patterson said, if necessary, the Opposition 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.