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Source: Bloomberg
By Kevin Crowley and Alex Longley

December 18, 2023 at 5:06 PM UTC

One of the world’s most-influential insurance markets added Guyana to its list of the riskiest shipping zones amid an escalating territorial dispute with neighboring Venezuela.

The decision announced by Lloyd’s Market Association’s Joint War Committee on Monday applies only to vessels visiting offshore installations in the Guyanese Exclusive Economic Zone outside the nation’s “territorial waters.”

The move may increase the cost of shipping crude from Exxon Mobil Corp.-run offshore installations that have transformed Guyana into one of the world’s fastest-growing oil provinces. Exxon recently started production at Payara, its third development in the area, bringing total output capacity to 620,000 barrels a day, a figure that’s expected to double over the next four years.

Any additional shipping costs are likely to be small at first. While the listing of an area means war-risk premiums can be charged, they generally only move higher when conflict breaks out. In the Red Sea, where there have been a spate of attacks recently, war coverage has risen about tenfold over the last couple of weeks but is still a fraction of a percent of the total value of a vessel.

Guyana’s explosive oil growth has reawakened a long-dormant dispute with Venezuela over the Essequibo region. Venezuelan President Nicolas Maduro told Exxon and others to withdraw from Guyana within three months after staging and winning a referendum on reclaiming the Essequibo. Meanwhile, Guyanese President Irfaan Ali has vowed to continue oil production.