July 22 2019
ExxonMobil’s local subsidiary, Esso Exploration and Production Guyana Limited (EEPGL), and partners have secured the necessary local insurance for its operations here even as the oil major’s Country Manager Rod Henson assured that it won’t have to be used since there will be no oil spillage or accidents.
“We have the required industry insurance and primary focus will be on safety. We are not going to have an oil spill,” Henson told Stabroek News in a recent exclusive interview. Diamond Fire and General Insurance (DFGI) Inc, a subsidiary of Demerara Distillers Limited issued the policy.
In addition to the US$2.5 billion in insurance coverage, ExxonMobil and partners Hess and CNOOC Nexen are currently working with the Bank of Guyana, the Department of Energy and the Environmental Protection Agency (EPA) regarding their plans for coverage “above and beyond” the insurance sum, to be absorbed by the parent companies.
The three companies have an agreement with the Government of Guyana for offshore oil operations in the 6.6 million acres Stabroek Block. EEPGL is the operator and holds 45 per cent interest in the block while Hess Guyana Exploration Ltd holds 30 per cent and CNOOC Nexen Petroleum Guyana Limited, 25 per cent.
Komal Samaroo, the Chairman of DFGI, said the insurance deal was a welcomed local content move and he looks forward to more companies providing services, thus maximising on local content provisions.
“We obviously are delighted…any new business that comes our way as a new company, we are elated and welcome it,” Samaroo told Stabroek News. “I think the answer lies in more local companies being able to provide services to the up-and-coming oil sector. The more companies can do, it is better for the overall economy,” he added.
The issue of insurance and liability coverage had seen ExxonMobil’s Liza Phase 2 project in the Stabroek Block project hit a snag earlier this year since the EPA wasn’t satisfied that the language used in the company’s application clearly stated the amounts to be covered above the insurance.
“The one thing I have been asking is: ‘What is the international standard? And if that standard would be used here?’ We are not asking out of the ordinary. All we want to have is what are they required to do for the developed countries and we should not expect or will accept anything less. In the application for the permit, there wasn’t evidence presented to satisfy the requirements for insurance and the key was in the clause for liabilities where it said EEPGL will cover. EEPGL is a limited liability company, they do not have the assets to cover. They are a subsidiary of ExxonMobil as everyone knows. Verbally, I was given the assurance that ExxonMobil would pick up the cost over and beyond the insurance coverage. But you have to understand that in business getting documentation is key. Yes, putting it in black and white. I wanted specificity as to how it would be covered by insurance and the parent company. ‘Oh, it will,’ then fair enough, show me in writing how,” EPA Head Dr Vincent Adams had previously told Stabroek News.
Attorney Melinda Janki had expressed concern that the liability coverage submitted by ExxonMobil was not enough as she pointed to the US$65 billion and climbing price tag of British Petroleum’s (BP) 2010 Deepwater Horizon spill. Janki had pointed to EEPGL’s financial statements for 2015, saying that the monies that the company had was not enough for insurance. As at December 31st, 2015, EEPGL’s total assets stood at $11,311,566,872.
She had said that the US$2 billion amount is not enough coverage and the issue needs to be addressed lest this country is left hapless in the event of an oil spill or other big accident.
Adams had pointed out that on careful analysis, persons would understand that it was for the same reason that the EPA asked ExxonMobil to provide coverage for its subsidiary and it did. However, a binding clause of a maximum amount and how that would be paid was not stated.
Absorb
Last week, Adams told Stabroek News, when contacted, that the partners are working out among themselves the amount each would absorb.
“Well, you know that EEPGL has also committed to providing the additional liability coverage. The insurance covers US$2.5 billion but they are working out the mechanism for the parent companies covering that. EEPGL does not have the assets and that was why it had to be covered by the parent companies. They have made a commitment to do that and I am sure that this will be completed long before first oil,” he said.
“The second part is for them to submit how exactly the parent company will cover the over and beyond the insurance amount,” he added.
Henson was asked for an update on the process of meeting insurance requirements and said that the company was working with government and the various agencies and will comply with all laws and was awaiting government’s input.
“We are in the middle of that process. We are working with the Bank of Guyana and the EPA and right now we have done everything we can do…we are all working. We absolutely intend to comply with the requirements. We are not dragging our feet at all…we will ensure the EPA is satisfied,” he said.
“The ball is not in our court for this. We have done everything we can do for that process,” he added.
The ExxonMobil official said that while it was good that the insurance requirements are met, he wants to assure the Guyanese people that the company’s main focus will be on safety and that there will not be an oil spill here. “We are going to do everything we can to make sure that doesn’t happen,” Henson said.
With a number of operators exploring start-up possibilities, the most recent being Tullow Oil’s drilling in the Orinduik Block, they will have to match the assurances and liability coverage given by ExxonMobil as Adams has said that the language used in the agreement between the EPA and EEPGL and partners will now “form the template for all other such arrangements.”