ExxonMobil says limited insurance coverage meets international standards

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President of ExxonMobil Guyana, Alistair Routledge said the US-oil giant has insurance coverage that meets international industry standards for all of its petroleum activities in Guyana.

“It is important to note from the onset that our first priority for every project is to put in place mitigations and processes that help to prevent adverse events by utilizing the best technologies, equipment, and people in our operations,” Routledge said in a statement on Monday.

His statement comes amid growing concerns over a decision by the People’s Progressive Party/Civic (PPP/C) Administration 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.

Opposition Member of Parliament, David Patterson, in filing a motion to reverse the Government’s decision has warned that a major oil spill would result in the environmental devastation for Guyana and its neighbouring countries, resulting in possible lawsuits.

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But in offering his assurance on Monday, Routledge said ExxonMobil maintains the industry’s only sustained, dedicated and in-house oil-spill response research programme, which dates back to the 1970s.

“Here in Guyana, we adhere to an internationally accepted, tiered response system used to determine the requirements of response personnel and equipment. This system remains aligned with the principles of the International Convention on Oil Pollution Preparedness, Response and Cooperation (OPRC), the Caribbean Island Oil Pollution Preparedness Response and Cooperation (OPRC), and the National Oil Spill Response Plan of Guyana to provide an efficient framework to build preparedness and response capabilities matching the oil spill risks from all types of operations,” he explained.

In the motion before the National Assembly, MP Patterson calls for the Government 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.

But ExxonMobil Guyana President said to suggest that the oil company will not be able to effectively manage response activities is inaccurate.

“Insurance is just one source of financial assurance that could be leveraged for response activities. The value of insurance will not limit the company’s ability to respond to an event, and response activities would certainly not be delayed by discussions with insurers,” he said while maintaining that Exxon has the financial capacity to meet its responsibilities for an adverse event.

“…we are committed to paying all legitimate costs in the unlikely event of an oil spill,” he added.

It was noted that Esso Exploration and Production Guyana Limited, the operator of the Stabroek block, was established in 1998, and had, as of year-end 2020, almost $US5.0Bn in assets, which is a primary form of financial assurance.

He said the US$5.0B is separate from the assets of the other Stabroek block co-venturers who also have substantial assets and share any liability for response activities.

According to Routledge, the oil company is also working with the Environmental Protection Agency (EPA) to put in place a combined $US2.0Bn of affiliate company guarantees, a value exceeding equivalent guarantees required by regulators in Canada, the United States and United Kingdom. He also refuted claims that the company had agreed to insurance at a value of $US2.5Bn with a previous EPA administration.

“As stated by ExxonMobil Chairman and CEO Darren Woods at the recent International Energy Conference, ExxonMobil is committed to Guyana for the long term. ExxonMobil Guyana has invested billions of dollars in multiple oil and gas projects here.  We are dedicated to avoiding any spill, but should one occur we are prepared to mitigate and resolve it as quickly and comprehensively as possible,” Routledge said.

Over the weekend former EPA Head Dr Vincent Adams said the increase in oil discoveries offshore Guyana is exciting, as it is dangerous for the country’s economy, especially in the absence of full coverage insurance, in the event of an oil spill, which could devastate Caribbean beaches and leave Guyana bankrupt.

He said too that the People’s Progressive Party (PPP) government must explain why it reversed the agreement between oil giant, ExxonMobil and the Environmental Protection Agency (EPA) when it comes to a full liability coverage.
Explaining the series of events in a more than 1000 word missive, Dr. Adams noted that the environmental regulator had gotten ExxonMobil to cover any damages beyond US$2.5 million, since the company had placed its subsidiary, Esso Exploration and Production Guyana Limited (EEPGL) on the hook, even though it lacked liabilities to cover for these damages.
According to him, “The Liza 1 project was the first to be granted an oil & gas Permit by EPA, and it was signed in June 2017, by Mr. Kemraj Parsram, the current Government appointed EPA Head who was Acting in that position prior to my period of service. In all fairness, Mr. Parsram may have signed the Permit based upon the “self-insurance” allowed by the 2016 Petroleum Agreement (The Contract) between the Coalition Government and Permit Holder EEPGL (subsidiary of ExxonMobil and operator of the oil & gas projects under parent companies ExxonMobil, Hess, and CNOOC)”.

“Self-insurance means that EEPGL would bear all financial liabilities; so, is exempt from having to obtain any outside insurance. However, the snag in this deal is that EEPGL as a newly formed limited liability company, did not, and does not, have any assets to cover any such liabilities,” Dr. Adams pointed out.
However, upon his appointment to the EPA, the former Executive Director said that Exxon was clearly told that the existing flaws in the Liza 1 permit would not only be corrected, but changes will also be incorporated into all subsequent permits in this regard.

After months of delay, Dr. Adams wrote that ExxonMobil had finally agreed to the EPA’s demand for full liability coverage. He said that the oil company had obtained the highest available insurance on the market to the value of US$2.5 billion, “proclaiming it to be adequate coverage”.
To this end, the former EPA head explained that this offer was vehemently disagreed to since the BP’s Macondo spill in the Gulf of Mexico was costing approximately $70 Billion USD. Such a bill on Guyana’s back would therefore not only leave Guyana bankrupt but also attract penalty law suits from neighbouring countries as a result of damages, hence the EPA demanded that the parent companies ExxonMobil, Hess and CNOOC, cover all liability costs over and above the $2.5 Billion insurance, which was agreed to.
“Exxon eventually acceded to our immovable demand for parent companies cover above the $2.5 Billion insurance; but asked that we sign the Liza 2 Permit, so as to maintain confidence in their investors, while affording time for the parent companies to agree upon how they will share the liabilities,” Dr. Adams said.

He went on to explain that the EPA had consented to Exxon’s request for the Liza 2 Permit to be granted but subsequent to that as the agreement was nearing completion of how the parent companies would share the full coverage, Dr. Adams was terminated from service along with the Attorney that was working on the contract.
Dr. Vicent Adams was removed from office in August 2020 and Exxon’s third project, the Payara Permit was approved the following month, without the agreed full coverage.
The Vice President, Dr. Bharrat Jagdeo when asked recently about the issue of full coverage insurance by the parent companies explained that the EPA is now seeking some US$2 billion worth of insurance.

The former EPA boss is therefore questioning whether the government has allowed ExxonMobil to drop the US$2.5 billion that was secured and has furthermore asked that it explains the reasoning behind this move.
“As protector of the nation’s economy, environment and health, the Government owes it to its people, to explain why it has taken such a dangerous step in taking the country from agreed upon full liability coverage to no coverage,” he argued.

In further presenting his case, Dr. Adams pointed out, “The extraordinary rapid increase in operations over the next few years, even so welcomed, would bring with it, a corresponding significantly increased risk of an oil spill –  a very frightening scenario, considering (1) the gross inadequacy of the Government’s oil spill Emergency Response Plan which I refused to sign, due to documented justifiable reasons; and (2) the Environmental Impact Assessments (EIAs) showing that a major spill could be just as devastating, or worse than the BP Macondo spill, with oil washing away the Caribbean beaches and their economies all the way to the Jamaica, resulting in Guyana’s and its neighboring countries environmental destruction, obliteration of the fishing industry, and economic bankruptcy including possible law suits from neighboring countries and other affected parties.”



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