While a High Court ruling has given the Environmental Protection Agency (EPA) 30 days to have ExxonMobil Guyana provide unlimited insurance coverage for its Liza Phase One Project, Vice President, Dr. Bharrat Jagdeo has expressed reservations about the practicality of such a demand.
During his press conference today, the official said the State has taken note of Justice Sandil Kissoon’s order on May 3, 2023 for Exxon’s affiliate, Esso Exploration and Production Guyana Limited (EEPGL) to provide an insurance package from a reputable firm. Exxon is also required to furnish regulators with an unlimited parent guarantee to cover all liabilities associated with an oil spill. Failure to do this by June 10 could see the Liza Phase permit being suspended.
Jagdeo said he agrees with the Attorney General, Anil Nandlall that such a judgment was made in error and ought to be appealed by the EPA. The official said unlimited parent guarantee is not a concept that exists in the world of insurance, adding that the risk has to be defined. He reasoned that this is the only way a premium can be set and paid.
He said the government is concerned about ensuring sufficient coverage is in place. In this regard, he spoke of the EPA’s efforts towards this end. Jagdeo explained that Guyana is armed with three mechanisms. He said the country is in receipt of a US$600M insurance package from EEPGL. Negotiations have also concluded for a US$2B parent guarantee from Exxon.
If those measures prove inadequate, he said the EPA has the power to liquidate EEPGL’s assets value US$6B to US$8B. In total, Guyana therefore has a fiscal protection that is almost US$10B.
Importantly, all insurance expenses are recoverable from revenues made via the Stabroek Block where two projects are in operation with a daily production of 380,000 to 400,000 barrels of oil.
Jagdeo said it is crucial that the government does not appear to be capricious in its dealings on these very complex matters. He said it is also incumbent on the courts to produce judgments that are in his view, well reasoned.
“I think it is treading in murky waters when you direct a regulatory agency to do its job…you cannot supplant yourself (in an agency) and you don’t know what are the challenges they face,” the official noted.
