Aon’s 11th Energy Insurance Training Seminar
Aon Energy Risk Engineering
AERE
Assessing Energy Risks
Catalina Wallis
Risk Engineer
Presentation Content
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Aon Energy Risk Engineering (AERE)
Overview of Piminca Facilities
– Offshore/Onshore Hazards
– Loss Exposures Offshore/Onshore (PD/BI)
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Estimated Maximum Loss
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Energy Risk Engineering Reports
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Business Interruption
Key Updates
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Global Coordination
– Aon Global Risk Consulting (AGRC) now coordinating all energy related risk
engineering services as a “virtual global practice”, sharing resources, best
practices, tools and marketing materials.
Branding
– Hydrocarbon Risk Consultants (HRC) and Risk & Reliability Services (RRS) have
rebranded to Aon Energy Risk Engineering as part of Aon’s master brand
implementation.
– Aon Energy Risk Engineering – part of AGRC
Key Updates
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Staffing
– Aon Energy Risk Engineering and AGRC has established technical leadership
centers for energy risk engineering in London, Dubai, Houston and Singapore
and now has experts in place in each location to coordinate with Aon Energy,
clients, prospects and markets
Services
– AGRC is positioning as an integrated provider of risk control, engineering and
related services to meet the needs of energy clients.
Fast Facts
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43 Aon Energy risk engineering professionals, located throughout global regions,
have energy experience, shown in green in the map below, with the four regional
centers referenced
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Aon Energy Risk Engineering leaders are recognized industry experts, participate in
industry organizations and are published authors of industry standards, guideline
books and recommended practices
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The wider service offering of AGRC is available through AERE for our Energy client
base, including Nat Cat analysis and Rapid Response.
London
Dubai
Houston
Singapore
Service Overview – Key Buyer Questions
Do you have adequate, cost-effective coverage
for major incidents, accurate underwriting reports and business
interruption requirements?
Have you identified the
risks associated with the
hazards at your facility and
the overall impact to your
company reputation?
Cash Flow
Balance
sheet
Brand
Aon
Energy Risk
Engineering
Process
Assets
Are you looking for a dedicated
staff of highly-skilled
professionals whose sole purpose
is to evaluate your asset
protection?
Do you have adequate valuation
data to ensure maximize
recovery is available from other
parties in the aftermath of
losses?
Do you have cost-effective
plans to protect your
organization’s key processes?
People
Do you understand your facility’s
hazard potential to personnel and have
adequate mitigation systems in place?
Aon Energy Risk Engineering (AERE)
Aon Energy Risk Engineering is a global, multi-disciplined risk engineering consultancy
focusing on the Energy sector. We bring together insurance and valuations, risk
engineering and process safety teams to form a “one stop” consultancy that offers a
complete risk engineering service to the oil, gas, petrochemical, chemical and
pharmaceutical industries worldwide. Our services are designed to assist in managing
risks at all stages of a facility from design, through construction, operation and eventual
decommissioning.
Aon Energy Risk Engineering (AERE)
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The Insurance Risk Engineering group is the focus for insurance related risk
engineering in Aon Global Energy and is centred on the 3rd Floor Block 8,
Devonshire Square, London - within the UK Energy team. We have risk engineering
resources worldwide
Our focus is on Upstream and Downstream Oil and Gas Risks worldwide and
Includes:
Onshore Oil and Gas
Offshore Exploration and Production
Refining
Chemicals
Gas Plants
Pipelines and Utilities
Global Energy Risk Engineering Resources
EUROPE
Risk Engineering Consultants
London/Germany/France/Russia
MIDDLE EAST
Dubai
Turkey
FAR EAST
Kuala Lumpur/
Singapore/Hong
Kong
AMERICAS
Houston, New York,
N Carolina
Calgary
Brazil
Some Major Clients
Sonatrach
British
Gas
Saudi Aramco
Petrobras
Thai Olefins
TUPRAS
Sunoco
CNOOC
Braskem
TOTAL
LyondellBasell
Pemex
KNPC
Eni
10
Client Benefits – Protection Of Cash Flow
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Reinsurance market underwriting reports
Insurance risk engineering consulting
– Estimated maximum loss
– Risk rating
– Business interruption studies
Construction project reviews
Client Benefits – Protection Of Balance Sheet
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Current property valuations
Desktop studies
Basic replacement cost reports
Detailed replacement cost reports
Client Benefits – Protection Of Process
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Safety review of design features
Fire protection review
Spacing and layout review
High-level HAZID
Provide staff for in-house project teams
Client Benefits – Protection Of People
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Hazard identification and evaluation
– Process Hazard Analysis (PHA)
– Layer of Protection Analysis (LOPA)
Facility siting to examine the risk to building occupants
Human factors
– Critical task analysis
– Control room/alarm evaluations
Audits to verify compliance and provide solutions
Provide solutions to underwriting recommendations
Client Benefits – Protection Of Brand
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Consequence assessment, including “PHAST” modeling of fire, explosion and toxic
release events
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Frequency assessment using Fault Tree Analysis to determine the likelihood of a
given event
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Quantitative safety risk assessment to evaluate the impact on human health, the
environment, property damage and business interruption using PHAST Risk
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Comparative risk analysis to determine cost-effective solutions to risk reduction
Client Benefits – Protection Of Assets
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Fire hazard assessment
Code and AHJ compliance
Suppression and detection system specification, design and performance testing
Fire water infrastructure specification, design and performance testing
Fire water pump specification, design and performance testing
Piminca Overview
Hazards & Loss Exposures
Overview of Piminca Facilities
Offshore
Compressor
Platform
100%
Alia
100%
Marine
Terminal
Rama
100%
16”
24”
Onshore
Gas Separation Plant 2
1 x Gas Separation Units
Gas Separation Plant 1
2 x Gas Separation Units
28”
Caribbean Gas
Distribution
Network
(Customer 3)
28”
Sale Plant
River Crossing
Control Room
Control Room
O’Keefe Dam
Drury
Jarma
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Hazards - Offshore
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Fire and Explosion
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Blowout
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Ship Collision
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Sinking
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Anchor Drag – Pipelines
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Dropped Objects
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Machinery Breakdown
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Natural Hazards
Hazards - Onshore
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Fire and Explosion
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Machinery Breakdown
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Natural Hazards – Earthquake/Windstorm/Flood
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3rd Parties
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Overland Pipeline loss – landslides/river crossings
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Ship Collision at Marine Terminal
Loss Exposures – Property Damage (PD)
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Fire and Explosion – loss of a platform/Gas separation Plant (GSP)/Terminal
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Machinery Breakdown – Compressors/On site Gas Turbine Generators (GTGs)
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Natural Hazards – loss/damage to offshore/onshore plant and equipment/power lines
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Overland Pipeline loss – landslides/river crossings
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Ship Collision – Platform/Marine Terminal
Loss Exposures - BI
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Loss of a platform/GSP/terminal – 2 year rebuild period
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Machinery Breakdown – Compressors/Turbo generators in Power Plant – 12 to 18
months
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Natural Hazards – loss/damage to offshore/onshore plant and equipment/power lines
– up to 2 years depending on level of damage
Loss Estimates - Onshore
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Vapour Cloud Explosion GSP1
– PD = US$280 million
– BI = US$90 million (18 months) shutdown Caribbean Gas Network, 60% of BI sum
insured
– Combined PD/BI – US$370 million
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Loss of GSP 2 will shut down supply to Sale Plant – possible penalties for failure to supply
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Fire and loss of Distribution Area Control Room (6 - 12 months downtime)
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Machinery Breakdown – Onshore Compressors/GTGs - 12 to 18 months – Extra Cost import of
Power
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Fire at the Marine Terminal/Ship Collision at Jetty – 6 months rebuild
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Natural Hazards – loss/damage to onshore plant and equipment/power lines – up to 2 years
depending on level of damage
Loss Estimates - Offshore
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Fire/Explosion/Windstorm
– 100% loss of Rama Complex Process Platform US$300 million (with allowance for
removal of wreck and clean up) – 26 month rebuild
– BI = US$130 million (26 months) loss of feed to GSP1 – 60% of supply
– Combined PD/BI – US$430 million
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Loss of Alia complex lower PD and will shut down GSP2
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Machinery Breakdown – Loss of Compressor on Compressor Platform – should be
OK as normally only 3 required
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Natural Hazards – loss/damage to platform – up to 26 months depending on level of
damage
EML Scenarios, Calculation Methodology
& Vapour Cloud Explosions
EML Definition
“The largest, low probability loss, which could be caused by a single occurrence of the
peril in question. Reasonably adverse conditions are assumed to exist; active
protection systems are assumed to be inoperable.”
EMLs are based on events considered by the engineer to be credible rather than
merely conceivable.
On most sites we could all conceive a highly improbable event that would destroy the
whole site.
EML Determination
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Scenario Identification: Consideration given to largest credible inherent hazard &
concentration of values
– Require accurate plot plan
– Replacement Values: Unit breakdown values & year of values
– Consequence analysis using ExTool (modeling software by Swiss Re Insurance
company)
EML should not be used as Loss Limit without careful consideration and advice to
assured that EML can be exceeded.
Typical Range of Calculated EMLs
Probability
Of Loss
EML
10-³
0
10%
20%
% Total Site Valve (TSV) Destroyed
100%
Vapour Cloud Explosion (VCE)
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Release of liquefied gas which flashes to produce a vapour cloud and finds an
ignition source.
Information required for VCE:
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Source of release
Composition of release (mixture or single component)
Available inventory for release
Pressure & temperature
Release rate
Duration (limited to 600 seconds)
Vapour Cloud Explosion – ExTool Output
Example
Vapour Cloud Explosion
Total EML Value
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To calculate Total EML value, other costs include:
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Inflation to current year – using published indices
Allowance for Associated Buildings and Utilities
Allowance for Interconnecting Pipework, etc.
Redesign, Procurement Engineering, Supervision, Testing and Commissioning costs
Removal of debris
Plus inflation to end of policy year
Cost escalation on "S" Curve over rebuilding period
Total EML Value Calculation in 2008 – Example
EML Table
Item
US$ million
Unit Loss at 2006 values
Plus inflation to current date -
133.00
2 year @
20 % pa
Sub Total
58.52
191.52
Plus Redesign, Procurement Engineering,
Supervision, Testing and Commissioning at
10 %
Calculated loss at beginning of policy year
19.15
210.67
Plus Removal of debris
10%
20.67
Plus inflation to end of policy year
1 year @
8 % pa
16.85
Plus cost escalation on "S" Curve over
rebuilding period of
2 year @
8 % pa
18.93
Total US$ Millions
267.12
Energy Risk Engineering Reports
Energy Risk Engineering Reports –
What do Underwriters use them for?
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Familiarisation with the Risk
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Location and Nature of Exposures
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Relative Risk Ranking
Values
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Estimation of EMLs
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Property
PD, BI, MB
Identifying Risk Improvement Opportunities
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Number and Type of Recommendations
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Insured’s Response and Follow-up
Input into Commercial Decision Making
Energy Risk Engineering Survey Reports –
Report Structure
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Background Information
– Location
– Exposures (fire & explosion, site boundary, etc)
– Loss History
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Site Facilities
– Process Facilities, Control & safeguards, etc
– Utilities (steam, power, plant air, etc)
– Storage (tanks, warehouse, etc)
– Import/export facilities (jetty, pipelines, etc)
– Construction & Layout
– New Developments/Projects
Energy Risk Engineering Survey Reports - Report
Structure
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Management
– Organisation
– Policies, Procedures
– Manning, Experience, Training
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Fire Protection
– Fire Proofing
– Detection systems
– Firewater
– Fixed Protection
– Mobile Equipment
Energy Risk Engineering Survey Reports –
Report Structure
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Loss Estimates
– Values
– EML/PML Estimate
– BI
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Risk Profile – including Risk Ranking
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Risk Improvement Recommendations
– New Recommendations
– Review of Previous Recommendations
Business Interruption
Business Interruption Insurance
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Major underwriting concern
– Small PD can give huge BI exposure
– BI is being given much more attention by Underwriters
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Underwriters believe that BI is not well understood by Brokers and Insured alike!
– Some 100 page Risk Survey reports have “two paragraphs” on BI
– Bases and assumptions rarely stated
– Lack of transparency in estimation methods used
Business Interruption Insurance
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Bases and Assumptions
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Gross Profit, Standing Charges
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Assumed plant throughput
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Assumed pricing or margin
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Contingent liabilities
Breakdown of BI
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By site – minimum required
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By key area or process unit preferred
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Generated by LP if possible
BI EML may not be same event as PD EML!
Thank You
Any Questions?