In order to reduce the risk of significant property damage losses, energy businesses need to learn from the sector’s past major loss events according to a report published today by Marsh for its National Oil Companies (NOC) Conference in Dubai.
Oil and petrochemical companies are extending their global footprints, building more capital-intensive assets and deploying more sophisticated technology to access hydrocarbon reserves in increasingly challenging conditions. This has heightened the risk profile of the sector, leading to greater potential for losses that can have a major impact on energy companies’ balance sheets.
The 22nd edition of Marsh’s report, The 100 Largest Losses, details the most significant property damage losses in the global hydrocarbon industry since 1972. According to the report, six of the 100 largest property damage losses – which include removal, clean-up, employee liability and business interruption costs – have occurred since 2009, based on current estimated values.
The report includes an analysis of last year’s explosion at an oil sands upgrader site in Alberta which incurred property damage losses of $600 million. It also includes a storm damage loss at a floating production, storage and offloading (FPSO) unit in the North Sea, where looses are currently estimated at $450 million. The Gulf of Mexico explosion in 2010 incurred property damage losses currently valued at $590 million.
Launching the report, Jim Pierce, Chairman of Marsh’s Global Energy Practice, said: “Companies involved in hydrocarbon production and processing are becoming increasingly sophisticated in their approach to risk management. However, even with improved engineering practices and hazard awareness, large losses continue to occur as the sector grapples with new risks and those associated with increasingly ageing asset bases in some parts of the world.
“As well as overcoming technological and geographical issues, the industry needs to recognise the challenges of operating in differing cultural environments. Translating good risk management practice from one region to another invariably requires more than just an ability to speak a second language.
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“Marsh’s NOC conference provides people from different geographies and cultures with the opportunity to share and learn from their experiences, for the betterment of the industry globally. The sector cannot afford to be complacent. It needs to understand and, importantly, remember the lessons from the past, while anticipating the risks created by this new era of exploration.”
Marsh’s annual NOC conference takes place under the patronage of His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai. Use this link to access more information about the conference and view special reports.