Energy Insurance

Ultimate Risk and Reward

Heath Callan
Energy Underwriter
Argenta PLC

The Energy Industry

explained.

Energy Defined
The exploration, production and marketing
of hydrocarbons and related energy products.

Exploration &
Production

Refining &
Processing

Petrochemicals

Transportation
& Storage

Utilities

Insurance Market Divisions

Upstream

Midstream

Downstream

Utilities

Upstream

Seismic Exploration

Seismic Exploration

Chase boat
Chase boat
1800 3200 meter long
towed streamers

Chase boat
6-8 meters below sea
surface

Sound waves. No harmful

effects on fish

Upstream

Seismic Exploration

Drilling Exploration

Drilling Exploration

Upstream

Seismic Exploration

Drilling Exploration

Control of Well (Operators Extra Expense (OEE))

Wellhead

How a well is drilled

Sealevel

30 inch

223 m

20 inch
900 m

14 inch

10 3/4 inch
7 inch liner

3600 m

5050 m
5800 m

Seabed

Upstream

Seismic Exploration
Drilling Exploration
Control of Well
Construction

Gas export line

Offloading
lines
Offloading tanker
Offloading buoy

Anchor lines

SCR

Water injection line

Suction anchors

Gas injection well

gas injection line

Subsea production well

Production loop

Control umbilical

Upstream

Seismic Exploration
Drilling Exploration
Control of Well
Construction
Production Risks

Midstream

Seismic Exploration
Drilling Exploration
Control of Well
Production Risks
Midstream

Refining

Seismic Exploration
Drilling Exploration
Control of Well
Production Risks
Midstream
Refining

Power Generation

Seismic Exploration
Drilling Exploration
Control of Well
Production Risks
Midstream
Refining
Power Generation

Underwriting an Energy Portfolio

Lloyds advantages
Access to business
Portfolio Management
Clash / Aggregations
Realistic Disaster Scenarios
Capital Requirements
Reinsurance

Current Issues

Market performance

20 YEAR OVERALL LOSS/PREMIUM TOTALS

WELD energy losses 1990 2011 (excess of US$ 1m)
versus estimated global energy premium income

US$bn
30

30

25

25

20

20

15

15

10

10

0
90

91

92

93

94

95

96

97

98

99

Losses excess US$1m

00

01

02

03

04

05

06

07

08

09

10 11*

Estimated Worldwide Premium (US$)

* incurred to date

Source: Willis Energy Loss Database as at May 13 2011 (figures include both insured and uninsured losses)

US$bn

Current Issues

Market performance
Unprecedented run of high value risk losses

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity

2011 CAPACITY INCREASED

Upstream Insurer Capacities 2000-2011
(Excluding Gulf of Mexico Windstorm)

US$m
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2000

2001

2002

Operating
Construction

2003

2004

2005

2006

2008

2009

2010

2011

2011 upstream capacity highest since records began

Estimated realistic market capacities

Source: Willis

2007

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks
Shale plays

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks
Shale plays
Frontier territories

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks
Shale plays
Frontier territories
Political upheavals

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks
Shale plays
Frontier territories
Political upheavals
Cost of steel / Rising costs

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks
Shale plays
Frontier territories
Political upheavals
Cost of steel / Rising costs
Third Party Liability and allocation of contractual risk

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks
Shale plays
Frontier territories
Political upheavals
Cost of steel / Rising costs
Third Party Liability and allocation of contractual risk
OEE - standalone

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks
Shale plays
Frontier territories
Political upheavals
Cost of steel / Rising costs
Third Party Liability and allocation of contractual risk
OEE - standalone
OPA / OPOL Pollution coverage

Current Issues

Market performance
Unprecedented run of high value risk losses
Capacity
Deepwater and subsea risks
Shale plays
Frontier territories
Political upheavals
Cost of steel / Rising costs
Third Party Liability and allocation of contractual risk
OEE - standalone
OPA / OPOL Pollution coverage
Hurricane impact.Ivan / Katrina / Rita / Ike

Israel Energy Sector

Noble / Delek and Leviathan

Zion Oil and Gas
ATP
Development Options ?
Gas market
Recent issue reported at Leviathan
Political / Terrorism Risk
OPA / OPOL for Israel ?
Local infrastructure
What if........MUST be considered.

Questions

Heath H. Callan
heath.callan@argentaplc.com