No resolution yet in Exxon’s liability coverage, insurance issues

-exploratory works stalled, sources say

Concerns about liability coverage in the event of oil spills and other accidents, and meeting local insurance requirements are yet to be resolved between ExxonMobil and the Environmental Protection Agency (EPA) resulting in a stalling of works at the company’s Stabroek Block, sources say.

Stabroek News was told that the EPA has continued to hold-off on the issuing of permits and drilling at ExxonMobil’s next well, the Yellowtail-1, could be hampered should the issues not be resolved soon. Following its latest oil finds at the Tilapia-1 and Haimara-1 wells which brought the total number of discoveries on the offshore Stabroek Block to 12, ExxonMobil announced last month that the Noble Tom Madden drillship will next drill the Yellowtail-1 well, approximately six miles west of Tilapia-1. Baseline 4-D seismic data gathering is underway, the company had said in a statement on February 6.

Contacted by Stabroek News yesterday, Public and Government Affairs Manager of Exxon-Mobil, Deedra Moe, said, “We’re actively engaged with the EPA to progress environmental permits for our work activities.”

Asked if exploratory works at Yellowtail-1 have been stalled she would only say, “Not at this time. We continue to work with the EPA.”

EPA chief Dr Vincent Adams was also guarded when asked about the developments and if there was a stall in the negotiations between his agency and ExxonMobil. He denied that discussions were stalled and said that both sides are working “earnestly” to have the matter resolved.

Questioned on if works at ExxonMobil’s Yellowtail-1 well were stalled due to the ongoing negotiations, he emphasised that both sides are working together.

“The EPA has been fully engaged with EEPGL (ExxonMobil’s local subsidiary, Esso Exploration and Production Guyana Limited) and is aware of the tight schedule of start of drilling of the Yellowtail well. EEPGL has been very forthcoming and cooperative in providing the requested information that meets the permit requirements, and the expectation is that the outstanding issues be resolved expeditiously and commencement of drilling of the well will still be on schedule,” Adams said.

Probed on if that means that works have been at a standstill, Adams said that he can only speak for the EPA and that this newspaper should ask the company. He said that his comments were “all I would say at this time.”

Stabroek News understands that the two key issues that need to be resolved before the EPA would issue the necessary permits are ExxonMobil committing in writing to meeting general industry standards for liability coverage, and meeting local insurance requirements. The latter matter, this newspaper was told, could easily be resolved but the first has seen the lengthened discussions. Sources have questioned why ExxonMobil would have a difficulty in meeting general industry standards in relation to liability coverage here.

Stabroek News had previously reported that ExxonMobil had been asked to document that it would cover the liabilities of EEPGL in an oil spill and to specify the maximum amount, which should be guided by global industry standards. After reviewing the company’s application for a permit, the EPA had  expressed concern that EEPGL, which with partners CNOOC and NEXXEN are in a production sharing agreement with the Government of Guyana, did not show evidence that it was financially capable of absorbing the liabilities from an offshore spill.

ExxonMobil subsequently submitted proof of insurance coverage of up to US$2 billion through a United Kingdom insurance firm. However, earlier this month, it was reported that the US$2 billion coverage does not meet local insurance requirements. In relation to this matter, Stabroek News was told that this could be easily resolved.

It is in relation to liability coverage that meets global standards where there appears to be some difficulty.

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 picks up and they have insurance and all of that. 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. You say, ‘Oh, it will,’ then fair enough, show me in writing exactly how and state by insurance. I wanted documented assurance by seeing insurance,” Adams had previously told this newspaper.

Attorney Melinda Janki had expressed concern that the liability coverage submitted by ExxonMobil  is 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 believes 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.

The EPA head had said that it is known that no insurance company would provide US$65 billion in coverage and it was why general industry standards were asked for. Coverage is first met by insurers in the event of a spill or other accident, and the company takes on the remainder.

It is unclear if ExxonMobil is open to this method.

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