By Kiana Wilburg
The Coalition Administration is confident that the necessary safeguards are in place to deal with any possible environmental implication that would result from petroleum operations offshore Guyana. While some have been convinced by the Government’s optimism, there are others who believe that it is a clear case of “the feeling you get before you know better.”
This was apparent at the recently concluded Guyana International Petroleum Business Summit (GIPEX). The event saw the attendance of several members of the government as well as prominent stakeholders in the industry.
In several instances, Minister of Natural Resources, Raphael Trotman, spoke about how resource rich Guyana is; and it was on this background that he was asked to speak on a few environmental matters.
Specifically, President of the Guyana Marine Conservation Society (GMCS), Annette Arjoon-Martins called on Minister Trotman to speak on the environmental safeguards that are in place so as to protect the country’s biodiversity.
Without a moment’s hesitation, the politician noted that like many members of civil society, it is something he is concerned about. He then assured those at the summit that the Government is working closely with other partners to prevent any kind of accident that would happen.
The Minister stated, “I know there have been different interpretations but ExxonMobil has demonstrated that it is doing all that it can do, and it has acquired the very best of technology that the world has to offer to date for design and construction of FPSO and various subsea architecture to deploy…We are also working with the Civil Defence Force (CDC) while preparing a national response plan.”
Trotman continued, “I have seen a draft of it and it is in various stages of development. We are also seeking training from the US Coast Guards and speaking with other Governments for support…We are not at all taking this for granted. It is something that we are very concerned about…”
While Trotman holds the aforementioned view, a revision of Guyana’s Production Sharing Agreement with ExxonMobil would paint an entirely different picture.
In the Agreement, there is no provision regarding any adverse impact on fishing grounds and coastal communities or on neighbouring countries.
This alarming observation was recently pointed out by Chartered Accountant, Chris Ram and political Commentator, Ramon Gaskin.
Ram in his recent writings noted that Article 20.2 of Guyana’s 2016 Oil Agreement deals with Insurance in respect of but not limited to assets, pollution, third parties and employees. The Attorney-at-law pointed out that the Agreement does not require any loss of production insurance as will apply in the case of any major disruption of production or environmental accidents.
He said that while this provision is absent from the 2016 Agreement, the 1999 Agreement which was signed by the Jagan administration, allowed for insurance to be taken out by Esso Exploration and Production Guyana Limited’s affiliate insurance company. Esso is a subsidiary of ExxonMobil.
Ram stated, “That requirement has been changed and now allows the Contractor to have the right to self-insure against the risks identified. This is a major concession by (Natural Resources Minister, Raphael) Trotman on an issue that only specialist lawyers know about. What it means in practice is that anyone seeking to make an insurance claim will have to lodge that claim against Esso, CNOOC/Nexen or Hess, all of which are external companies.
“Those potential claimants must thank Raphael Trotman for making their chances even more difficult to succeed.”
CASE OF UGANDA
In 2012, the Government of Uganda signed a PSA with British operator, Tullow Oil. That entity is also exploring in Guyana’s deep waters.
In the PSA of that African nation, there are strict provisions for Insurance.
The PSA notes that the Licensee is to provide a Performance Security in the form of Insurance Bond or Bank Guarantee amounting to US$500,000 which shall, inter alia, guarantee the payment by Licensee of the sums, if any, due and payable to the Government pursuant to the paragraph hereunder.
“To ensure that Licensee, its Contractors and Sub-contractors meet their obligations to third parties, or to the Government, that might arise in the event of damage, loss or injury (including environmental damage or injury, removal of wrecks and cleaning up caused by accidents) caused by Petroleum Operations, Licensee shall maintain in force an insurance policy through an international insurance company of good financial standing covering the activities of itself and its contractors and sub-contractors, sub-licencees and the employees of all such parties.”
“…To the extent that third party liability insurance is unavailable or is not obtained, or does not cover part or all of any claims for damage, loss or injury caused by or resulting from Petroleum Operations, Licensee shall remain fully responsible and shall defend, indemnify and hold the Government harmless against all such claims by the Government arising from any such damage, loss or injury.
“Licensee shall indemnify, defend and hold the Government harmless against all third party claims for damage, loss or injury, including, without limitation, claims for loss or damage to property or injury or death to persons, caused by or resulting from any Petroleum Operations conducted by or on behalf of Licensee.”
OIL SPILL ISSUES
When it comes to oil and gas companies, it would not be unreasonable for countries to properly prepare for the possibility of an oil spill. In fact, these companies are expected to prepare for such environmental disasters as part of their risk assessment.
But with ExxonMobil which is set to kick start in March 2020, Guyana is yet to see what provisions are in place by the company or the government in relation to oil spill prevention and the readiness to respond.
Kaieteur News challenged Country Manager for ExxonMobil, Rod Henson, during a press conference at the Marriott Hotel to say if there were contractual provisions in place for such an eventuality.
Henson advised that there is “language” in the contract it has with the Government which speaks to this. But a careful examination of Article 28 of the Contract which focuses on Social Responsibility and Protection of the Environment only sparks more questions.
In fact, the only detailed financial arrangement in place in the aforementioned heading is for social and environmental projects to be discussed and agreed upon by the two parties.
That arrangement says, “The Minister and the Contractor shall establish a programme of financial support for environmental and social projects to be funded by the Contractor. The Contractor shall directly fund the amount of US$300,000 per Calendar Year with any unspent portion carried over into the ensuing Calendar Years of the Agreement.”
Furthermore, Henson noted that the ExxonMobil has in place, its own Oil Spill Response Plan. He said that the Government of Guyana is in possession of this document. The nation is yet to see this plan.
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