Ottawa to Recover a $347M Insurance Payout to Suncor Tied to Libya Crisis

Following the political conflict in Libya, the federal government wants to recover over $350 million in insurance payments made to Suncor Energy Inc.

According to a recent Federal Court ruling, Suncor Energy Inc., one of Canada’s biggest oil companies, requested $300 million in risk mitigation payments to cover losses on Libyan energy assets caused by an outbreak of political conflict in 2015.

In 2019, an arbitrator determined that the total amount would be $347 million, including interest.

Export Development Canada, a provider of insurance against losses caused by political violence, disputes the statement, claiming that Suncor’s oil production facilities continue to generate profits for the Calgary-based company.

“According to EDC’s May 15, 2022, notice of arbitration, the Libyan assets continue to have significant value and generate revenue for Suncor and its subsidiaries. EDC seeks to recover the amounts realized in connection with the assets until the $347 million has been repaid in full,” stated Judge Christine Pallotta on Monday.

Although Suncor failed to respond to any comments, the company’s website states that political unrest in Lybia is continuing to affect operations.

“As of the end of 2015, production in Libya remains substantially shut-in given the political unrest. The timing of a return to normal operations remains uncertain,” as cited in the site.

In 2011, during the outbreak of civil war that ultimately led to the capture and death of President Muammar Gaddafi, Suncor halted its exploration activities in Libya.

“The period of force majeure under its contractual obligations has since ended in Libya, and Suncor has restarted exploration activities,” said the site.

When Suncor first entered the Libyan market in 2008, it did so through Harouge Oil Operations, in which it maintained a 49 percent stake together with the state oil company.

As the main parties in the court dispute were unable to reach an agreement on an arbitrator, the judge assigned one on Monday to handle the insurance case. Additionally, the judge rejected a plea from four Suncor subsidiaries to be dismissed from the case.

The insurance claim was initially filed under a policy issued by Export Development Canada for Petro-Canada in 2006, which is now part of Suncor Energy Inc. since 2009.

“The relevant claim related to Suncor’s oil operations in Libya was received following the Arab Spring movement that began in the early 2010s,” said on Wednesday Export Development Canada spokeswoman Jessica Draker.

“As EDC and Suncor are in active legal proceedings, we are limited in what we can share. … The ongoing arbitration between EDC and Suncor is a private process and is therefore confidential.’”

According to its annual reports, the Crown corporation’s political risk insurance portfolio declined from $2.81 billion in 2015 to $359 million by the conclusion of 2022.

“We stopped issuing new policies within this program in 2020,” according to the latest one.

Approximately 57% of the portfolio was allocated to the Africa and Middle East region, a significantly larger proportion compared to any other geographical area.