Oil company operating in Guyana slapped with US$4.5B lawsuit in Peru over 12,000 barrels of spilled crude

Aug 26, 2022 News

Kaieteur News – A Peruvian judge on Tuesday admitted a US$4.5 billion oil spill lawsuit against Spanish oil giant, Repsol, over an underwater oil pipeline owned by the company that leaked approximately 12,000 barrels of crude into the Pacific Ocean – which is shared with Peru’s western border.

Image of the oil spill in Peru. (Photo: Municipality of Ventanilla)

It was on January 15, last when thousands of barrels of crude were spilled from one of Repsol’s La Pampilla refineries off the coast of Ventanilla in the region of Lima, Peru. It happened when an Italian-flagged tanker, Mare Doricum, was unloading at one of Repsol’s refineries.

The spill contaminated Peruvian waters, blackened several of the country’s beaches and disrupted the livelihood of artisanal fishermen.

As such, in May, Peru’s consumer protection agency, National Institute for the Defense of Competition and Protection of Intellectual Property (INDECOPI) approached the 27th Supreme Court of Peru and filed a civil lawsuit is seeking US$3 billion for environmental damage and US$1.5 billion for damages to locals and consumers.

With the admittance of the oil lawsuit, it means that the matter will now go to court. Repsol, a company that is also operating here in Guyana, has since denied responsibility for the spill and said that it sees the legal claim as “baseless, inadmissible, and inconsistent.”

“We have not yet been notified of the court’s acceptance of the complaint, and we do not know the details of the acceptance,” a spokesperson for the firm told the BBC.

“We reiterate that the causes are still under investigation, but that the preliminary findings indicate that it was caused by an uncontrolled movement by the Mare Doricum vessel while it was unloading crude at the terminal.”

‘Even so, Repsol has used all means at its disposal to contain, clean, and remediate the coastline, assist the communities in the area, and rescue and attend to the fauna affected by the oil spill,” the spokesperson added.

Kaieteur News recently reported that in light of the oil spill, Peru’s Minister of Environment, Modesto Montoya, has prepared a legislative proposal for the creation of a guarantee fund against environmental disasters. This would require all companies operating in Peru to sign the guarantee fund before they will be allowed to start production. His new move is added to the many action Peruvian authorities had to take against the Spanish oil giant.

The first action taken against the company was by Peruvian judge, Romualdo Aguedo, on January 28, 2022, who granted an order to prevent four Repsol’s executives from leaving the country. Judge Aguedo has imposed an 18-month ban on the grounds of the potential risk that the officials might leave Peru and not honour their obligations in the country.

In January, the Peruvian government had suspended the company’s hydrocarbon loading and unloading activities. Subsequently, a fuel shortage in Peru forced the country to lift the suspension on Repsol’s operation temporarily. Repsol was only allowed to continue its operations for 10 days and under supervision from a state agency – that operation has come to an end.

Due to the impact the oil spill had on Peru’s fishermen, the Peruvian Government had ordered the oil giant, to pay a total of US$1400 compensation to each citizen affected by the spill. The Government took the aforementioned route since a legal process for compensation to the affected families would take a long time.

Nevertheless, in May, the Peruvian authorities through INDECOPI filed a lawsuit against Repsol, for a total of US$4.5 billion. Peru’s fight to get the oil company to take responsibility for the environmental disaster – comes even as the Guyana Government recently threw out a motion that was seeking full liability coverage from oil companies for oil spills.

Despite promising to press ExxonMobil Guyana (Esso Exploration and Production Guyana Limited) on the issue to have the parent company (ExxonMobil) for the Guyana Operations sign on to binding full coverage insurance, the Irfaan Ali led PPP-administration has shifted that responsibility to the Environmental Protection Agency (EPA).

In July, a four-hour long debate on a Motion seeking full liability coverage for oil spills ended with the Motion being thrown out by the government.

The Motion that was filed by Opposition Member of Parliament (MP), David Patterson, who sought to not only include unlimited liability coverage for oil spills and other disasters related to petroleum production but also to direct the Government to conduct an independent analysis on the possible ill effects of an oil spill, and present this report to the Parliamentary Committee on Natural Resources to be used as a reference for all other future oil development submissions.

While the Government of Peru has to take legal action against and continuously fight for Repsol to honour its duties – Guyana in contrast, continues to give ExxonMobil permission to operate without a guarantee that it would cover the cost for any oil spill that surpasses the capacity of its subsidiary to pay.

In February last, ExxonMobil announced that it has commenced oil production at Guyana’s second offshore development area called Liza Phase Two in the Stabroek Block. It would be poignant to note that with the coming on-stream of the Liza Phase Two operations, the country now has an installed production capacity of some 360,000 barrels of oil daily.

This is from the two Floating Production Storage and Offloading Vessels—Liza Destiny and Liza Unity—currently operating in the prolific Stabroek Block. Additionally, the operations are being undertaken, producing 360,000 barrels of oil daily (bpd) in Guyana without full coverage insurance in case of a spill domestically.