Oil Drilling Insurance Coverage in Question

UK-based Bahamas Petroleum Company (BPC) has claimed repeatedly that they have insurance coverage from Lloyd’s of London to drill an exploratory well in the waters of The Bahamas but recent statements from Lloyd’s contradict this, leaving their insurance coverage in the event of a disaster in serious question. 

On 17th November 2020, BPC made a public RNS statement saying they had “placed an extensive suite of insurance policies to cover drilling operations for Perseverance #1, including an appropriate well control policy.” They stated: “ The insurance placement is with a panel of insurers comprising of Lloyd’s of London and International Company markets” 

However when Our Islands Our Future sought confirmation of BPC’s insurance arrangement from Lloyd’s of London, a senior officer from Lloyd’s; Michaele Hawkins – Head of Responsible Business, responding on behalf of Lloyd’s Chief Executive John Neal, stated: “At present we don’t have any record that this risk is being underwritten in the Lloyd’s market.”

Our Islands Our Future wrote again noting the seriousness of the issue, the most recent statements made by BPC and the intention to send a press release to draw attention to this very apparent contradiction and asking if Lloyd’s had any more comment to make on the matter. On 14 January the group received the simple response from Lloyd’s; “Thanks for your follow up email.  We won’t be making any further comment on this particular project.”

The glaring question now is what insurance coverage does BPC have for the drilling of the Perseverance #1 well that started on the 20th December, 2020? If the Lloyd’s official was somehow mistaken, BPC should clarify this point immediately and release a detailed outline of their agreement, including the amount of coverage in the event of a disaster, the duration of the policy and the name of the insurer.

Our Islands Our Future is a coalition of over 150 Bahamian and international businesses and organisations that are opposed to oil drilling in Bahamian waters. Coalition supporters have repeatedly raised concerns about the adequacy of insurance coverage. Casuarina McKinney-Lambert, Executive Director of Bahamas Reef Environment Educational Foundation (BREEF) stated: “It is essential to have an environmental bond or equivalent financial guarantee, and adequate insurance to cover the cost of clean-up in the event of spill that might impact The Bahamas and also affect our neighbouring countries. We haven’t seen evidence of either of these things.” Rashema Ingraham Executive Director of Waterkeepers Bahamas stated that “$7.7 billion in annual revenue to The Bahamas from fishing, tourism and other marine activities have been at risk since drilling began.  There should be a level of transparency in communicating the risks to these sectors and outlining the details of the insurance coverage so that they are not the ones having to clean-up a spill”.

The drill site is located in a pristine part of the Bahamian archipelago, in approximately 520m water on the edge of the important fishing grounds of the Great Bahama Bank. It is downstream of the Cay Sal Marine Managed Area – notable for endangered sea turtle nesting and conch breeding grounds, and near the Andros West Side National Park – home to flamingos, world-famous Andros bonefishing flats, and mangrove wetlands that serve as a nursery for fish and other marine life. 

Paul Maillis, director of the National Fisheries Association of The Bahamas, voiced concerns that the well BPC’s well could threaten the investment made by fishermen in “tens of thousands” of lobster condos and traps laid in the Great Bahama Bank area if there was a spill or any incident.

Numerous bonefish lodges and other tourism operators on Andros and throughout The Bahamas have opposed the drilling both because of the risk of a large spill and also because of the daily discharges that are inherent in the oil industry that would threaten their livelihood. 

The oil drilling has also caught the attention of neighbouring Florida and other states along the Eastern seaboard. Eighteen members of Congress, including the entire South Florida delegation, wrote a letter to Prime Minister Minnis warning of the potential for “severe, even catastrophic, impact” if a spill occurs. Jerry Libbin, president and CEO of the Miami Beach Chamber of Commerce. stated: “An oil spill in The Bahamas could absolutely devastate Miami’s coastal economy. The BP Deepwater Horizon disaster was from an exploratory well, which is the same type being pursued in The Bahamas.” The Deepwater Horizon exploratory well exploded in 2010, killing 11 rig workers, spilling 134 million gallons of oil into the Gulf of Mexico, costing  $65 billion dollars and damage to tourism and fisheries along the US Gulf coast.

Environmental  law organisation Earthjustice investigated the economic risk that The Bahamas may be facing in the event  of a spill affecting US  resources and stated: “The drill site for BPC’s “Perseverance #1” well in The Bahamas sits about 100 miles from U.S. waters. Oil spill modeling demonstrates that under the majority of likely spill scenarios, oil will reach U.S waters. BPC does not appear to have the funds necessary to pay the high costs associated with oil removal and damage resulting from a spill. Therefore, the U.S. government could seek reimbursement for these costs from the Bahamian Government under the Oil Pollution Act, as the responsible foreign government that reviewed and authorized the drilling. This would essentially place the burden on the Bahamian taxpayer to fund cleanup from BPC’s spill. Along with the substantial risk of spills associated with exploratory well drilling, taxpayers would be exposed to even longer-term risk if BPC discovers oil and moves to production.”