Feb 12, 2021 News
– Oil Boss says “Subsidiaries are nothing, you have to get insurance from parent company”
By Mikaila Prince
Kaieteur News – Suriname leaves no stone unturned when it comes to securing benefits for its people. In fact, the country’s national oil company (NOC), Staatsolie, ensures that the parent companies in the oil and gas sector take full responsibility for any oil spill that may occur in Suriname waters.
Staatsolie’s Chief Executive Officer (CEO) and Managing Director, Rudolf Elias revealed these crucial protective measures during his debut appearance on the Kaieteur Radio programme Guyana’s Oil & You, on February 4, last.
There, Senior Kaieteur News Journalist Kiana Wilburg asked Elias if Staatsolie ensures that it gets full insurance coverage from the parent company in the unfortunate event of an oil spill occurring.
To this, the oil boss explained, “Yeah, the parent company. The subsidiary is nothing. You have to get the insurance from the parent company, and if you have the insurance of the parent company then you shouldn’t have to worry, because they have more to lose even as the country.”
Further, Elias stated that if a country proceeds with an oil development then it must ensure that it is done with the “big boys” as he pointed to companies like US ExxonMobil and French Total or “one of these companies because they have very big pockets.”
In continuing, Elias pointed to British Petroleum (BP) and its well blowout in the Gulf of Mexico of 2010. In that disaster, which is deemed as the world’s worst accidental oil spill, BP was required to pay for US$70B in damages. Eleven years later, BP is still paying for that spill. It begs the question whether the subsidiary would have been able to handle those billion of dollars in expenses had it been on the hook for such a disaster.
“So it [an oil spill] can happen. We say that it cannot happen. But when a disaster does happen, you have to ensure that the companies who are backing this should be the big brother, one of the big ones,” Elias maintained.
Guyana still without comprehensive insurance
It has been one year since Guyana has been producing oil in the Stabroek Block, namely at the Liza Phase One operation. ExxonMobil, the operator of the block, is currently producing 120,000 barrels of oil each day. Even with such high production levels, Guyana has no commitment from Exxon, Hess Corporation and CNOOC/NEXEN that it would ensure the provision of comprehensive insurance if a spills occurs.
Instead, what Guyana has secured is a limited insurance policy for Liza One from the subsidiaries, or limited liability companies – namely Esso Exploration and Production Guyana Limited (EEPGL), Hess Guyana and CNOOC/NEXEN Guyana.
When the Environmental Protection Agency (EPA) was under the stewardship of Dr. Vincent Adams, he had realized that the agency had erred in allowing the subsidiaries to cover an oil spill for the Liza Phase One Project. As a result, he ensured that provisions were inserted into the environmental permits for the Liza Phase Two and Payara projects to ensure that they are covered not just by insurance from the subsidiaries but by the parent companies too.
It is important to note however that Guyana is yet to receive a formal agreement from the parent companies that they would foot the bill of their subsidiaries. In light of this state of affairs, Guyana is left exposed to paying for an oil spill that the subsidiaries on their own, might not be able to cover.
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