Oil, gas industry… Govt negotiating with Exxon Mobil on $2B US insurance policy

─ AG schools Opposition on policy
─ says motion woefully wrong, misconceived

Government is negotiating insurance coverage of up to US $2 billion with US oil major ExxonMobil, in the event of an oil spill or disaster.   

Attorney General and Minister of Legal Affairs, Anil Nandlall S.C. said the parliamentary opposition’s motion which was defeated in the National Assembly last Thursday was riddled with errors, unrealistic, and misconceived.

Attorney General and Legal Affairs Minister, Anil Nandlall S.C.

He made this disclosure on his weekly ‘Issues in the News’ Programme aired Tuesday on Facebook, where he addressed the motion, schooling the opposition on government’s insurance policy for the new and emerging sectors.

The motion was presented by Opposition Parliamentarian David Patterson and called for government to adopt full unlimited liability coverage for oil spills and other disasters related to petroleum production, as a condition for granting approval for ExxonMobil’s fourth project, the Yellowtail development, and all other future petroleum development.

A ship drilling for oil

It also called for an independent analysis of the possible ill effects of an oil spill. The motion, which was defeated, also called for the report to be submitted to the Parliamentary Committee of Natural Resources and used as a reference for all other future oil development submissions.

Attorney General Nandlall noted that he was not a speaker on the motion in parliament, but the debate is still ongoing in the public domain about the issues raised.

He was adamant that government was talking to ExxonMobil now to strengthen the insurance coverage.

This, he said, was in addition to the steps taken by the Administration on tackling the issue of insurance to safeguard Guyana’s environment in light of an oil spill or some disaster.

“So, Liza, one that they issued had no insurance whatsoever.  We amended Liza one and we put insurance. We also put insurance on Liza two, and we put insurance also in the Yellowtail…and what is that insurance? It is $600 million U.S. dollars per event. So, if you have an event today, $600 million insurance coverage you have, you’ll have an event tomorrow… and then you’ll have we are currently negotiating with the parent company for a $2 billion coverage. $2 billion U.S. dollar coverage. So that is the framework that we currently have as per the license now”, the legal affairs minister said.

Attorney General Nandlall explained that is a significant leap forward with regards to the insurance framework of these petroleum companies.   

“It may not be the perfect insurance scheme or policy, but it is far better than they [APNU+AFC Administration] had, which was zero…There was an argument that was put forward to limit liability only to certain areas of damage. That was a proposal that was on the table. We rejected that…We rejected that, employing the causation principle in the law, negligence, and the principle of polluter pays. The insurance policy will run wherever the damage flows. That is the principle. Wherever the damage flows and the extent of $600 million”, he said.

He made it clear he was merely clarifying the misconception of government’s commitment to having a strong insurance policy for the oil and gas sector.

So, the misinformation and lack of information that was… that came out of that motion was repeated and enlarged in in the press. And that is the problem. And that is why every one of these motions and these statements that these fellows are making, you have to examine them, scrutinise them and answer them. Because they have a habit. They have a tendency of making up a lie and repeating this lie ever so often…And that lie in their heads becomes become the truth. And I’ve seen that said so many times, and done it so many times…”, the AG warned.

Nandlall said if anyone knows how the insurance industry works in Guyana one would question the practicality of the motion in the first place.

He delved into the school of thought which supports the motion in championing the government to try and negotiate for limitless insurance coverage.   

“…the concept of unlimited insurance can only be a theoretical construct. It doesn’t exist in the real world…Practicality and pragmatism do not support this concept of an unlimited insurance. The concept is repulsive to reality… Contract, by its very nature, must be precise. It must have terms and conditions that are precise so that people can know what they are agreeing to. Who will agree to a contract that has limitless liability…Which insurance company will agree to a contract that has no ceiling on the limit?”, Minister Nandlall questioned.

He said government must be practical and realistic when negotiating with the oil and gas industry. 

The legal affairs minister said the entire basis of the motion is flawed.

“Well, it doesn’t make sense, but this guy puts it in a motion and then argues on it. So, the entire concept of his motion, the entire basis of his motion was misconceived and flawed. …Now obviously our government values insurance… But let’s go back to when they were in government, because these guys come to the parliament while we are in government and they bring all sorts of things. They move all types of motions to do things that they never did when they were in government and they were only delivered two years ago…”,the Attorney General said.

He said the PPP Government has to stay within the prescinds of the agreement that was signed by the APNU+AFC Administration with respect to the issue governing insurance in the petroleum sector.

“…what Mr. Patterson doesn’t understand…they signed the contract. I’ve described the contract as the most lopsided contract in the world… That contract has a clause in it that speaks to insurance and regulates the issue of insurance between the parties… that the four corners of that clause in that contract is what must govern in the insurance in relation to that sector, at least the operators who have signed that signed that contract…You can’t come outside of the four corners of that clause…” he said.

Meanwhile, Minister Nandlall said this is just one example of the opposition spreading false information with the intention of getting the public excited and agitated for no reason.

He said one should look no further than to the contents included in Patterson’s original motion which has a host of factual errors.

“So, every time these people speak, you have to examine what they see microscopically, clinically and critically because 99% of the times they are lying and they are spewing untruths, and half-truths”, he said.

Only Wednesday, the government welcomed the latest oil discoveries announced by US oil giant ExxonMobil, which, Natural Resources Minister Vickram Bharrat said will further translate into improved living standards for Guyanese.

The oil and gas company announced the discovery of commercial quantity of oil at its Seabob and Kiru-Kiru wells Tuesday.

The company said the Seabob-1 well encountered approximately 131 feet (40 meters) of high-quality hydrocarbon-bearing sandstone and was drilled in 4,660 feet (1,421 meters) of water by the Stena Carron drill ship. The Kiru-Kiru-1 well encountered approximately 98 feet (30 meters) of high-quality hydrocarbon-bearing sandstone and was drilled by the Stena DrillMAX in 5,760 feet (1,756 meters) of water.

With these two discoveries, the oil find of ExxonMobil has increased to seven so far for 2022.

COVID-19 Notice: Due to the pandemic some consular services will be conducted by registered mail until further notice. Learn more