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Aon

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Title: Aon


1
Aons 11th Energy Insurance Training Seminar
Aon Energy Risk Engineering AERE Assessing
Energy Risks
Catalina Wallis Risk Engineer
2
Presentation Content
  • Aon Energy Risk Engineering (AERE)
  • Overview of Piminca Facilities
  • Offshore/Onshore Hazards
  • Loss Exposures Offshore/Onshore (PD/BI)
  • Estimated Maximum Loss
  • Energy Risk Engineering Reports
  • Business Interruption

3
Key Updates
  • 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 Aons master
    brand implementation.
  • Aon Energy Risk Engineering part of AGRC

4
Key Updates
  • 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.

5
Fast Facts
  • 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
  • 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
  • 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
6
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
Do you have adequate valuation data to ensure
maximize recovery is available from other parties
in the aftermath of losses?
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 cost-effective plans to protect your
organizations key processes?
People
Do you understand your facilitys hazard
potential to personnel and have adequate
mitigation systems in place?
7
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.

8
Aon Energy Risk Engineering (AERE)
  • 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

9
Global Energy Risk Engineering Resources
EUROPE Risk Engineering Consultants London/Germa
ny/France/Russia

MIDDLE EAST Dubai Turkey
FAR EAST Kuala Lumpur/ Singapore/Hong Kong
AMERICAS Houston, New York, N Carolina
Calgary Brazil
10
Some Major Clients
Sonatrach
British Gas
Saudi Aramco
Petrobras
Thai Olefins
TUPRAS

Sunoco
CNOOC
Braskem
TOTAL
Pemex
LyondellBasell
Eni
KNPC
10
11
Client Benefits Protection Of Cash Flow
  • Reinsurance market underwriting reports
  • Insurance risk engineering consulting
  • Estimated maximum loss
  • Risk rating
  • Business interruption studies
  • Construction project reviews

12
Client Benefits Protection Of Balance Sheet
  • Current property valuations
  • Desktop studies
  • Basic replacement cost reports
  • Detailed replacement cost reports

13
Client Benefits Protection Of Process
  • Safety review of design features
  • Fire protection review
  • Spacing and layout review
  • High-level HAZID
  • Provide staff for in-house project teams

14
Client Benefits Protection Of People
  • 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

15
Client Benefits Protection Of Brand
  • Consequence assessment, including PHAST
    modeling of fire, explosion and toxic release
    events
  • Frequency assessment using Fault Tree Analysis to
    determine the likelihood of a given event
  • Quantitative safety risk assessment to evaluate
    the impact on human health, the environment,
    property damage and business interruption using
    PHAST Risk
  • Comparative risk analysis to determine
    cost-effective solutions to risk reduction

16
Client Benefits Protection Of Assets
  • 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

17
Piminca Overview Hazards Loss Exposures
18
Overview of Piminca Facilities
19
Hazards - Offshore
  • Fire and Explosion
  • Blowout
  • Ship Collision
  • Sinking
  • Anchor Drag Pipelines
  • Dropped Objects
  • Machinery Breakdown
  • Natural Hazards

20
Hazards - Onshore
  • Fire and Explosion
  • Machinery Breakdown
  • Natural Hazards Earthquake/Windstorm/Flood
  • 3rd Parties
  • Overland Pipeline loss landslides/river
    crossings
  • Ship Collision at Marine Terminal

21
Loss Exposures Property Damage (PD)
  • Fire and Explosion loss of a platform/Gas
    separation Plant (GSP)/Terminal
  • Machinery Breakdown Compressors/On site Gas
    Turbine Generators (GTGs)
  • Natural Hazards loss/damage to offshore/onshore
    plant and equipment/power lines
  • Overland Pipeline loss landslides/river
    crossings
  • Ship Collision Platform/Marine Terminal

22
Loss Exposures - BI
  • Loss of a platform/GSP/terminal 2 year rebuild
    period
  • Machinery Breakdown Compressors/Turbo
    generators in Power Plant 12 to 18 months
  • Natural Hazards loss/damage to offshore/onshore
    plant and equipment/power lines up to 2 years
    depending on level of damage

23
Loss Estimates - Onshore
  • Vapour Cloud Explosion GSP1
  • PD US280 million
  • BI US90 million (18 months) shutdown Caribbean
    Gas Network, 60 of BI sum insured
  • Combined PD/BI US370 million
  • Loss of GSP 2 will shut down supply to Sale Plant
    possible penalties for failure to supply
  • Fire and loss of Distribution Area Control Room
    (6 - 12 months downtime)
  • Machinery Breakdown Onshore Compressors/GTGs -
    12 to 18 months Extra Cost import of Power
  • Fire at the Marine Terminal/Ship Collision at
    Jetty 6 months rebuild
  • Natural Hazards loss/damage to onshore plant
    and equipment/power lines up to 2 years
    depending on level of damage

24
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26
Loss Estimates - Offshore
  • Fire/Explosion/Windstorm
  • 100 loss of Rama Complex Process Platform US300
    million (with allowance for removal of wreck and
    clean up) 26 month rebuild
  • BI US130 million (26 months) loss of feed to
    GSP1 60 of supply
  • Combined PD/BI US430 million
  • Loss of Alia complex lower PD and will shut down
    GSP2
  • Machinery Breakdown Loss of Compressor on
    Compressor Platform should be OK as normally
    only 3 required
  • Natural Hazards loss/damage to platform up to
    26 months depending on level of damage

27
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28
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29
EML Scenarios, Calculation Methodology Vapour
Cloud Explosions
30
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.
31
EML Determination
  • 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.

32
Typical Range of Calculated EMLs
Probability Of Loss
EML 10-³
0
20
10
100
Total Site Valve (TSV) Destroyed
33
Vapour Cloud Explosion (VCE)
  • Release of liquefied gas which flashes to produce
    a vapour cloud and finds an ignition source.
  • Information required for VCE
  • Source of release
  • Composition of release (mixture or single
    component)
  • Available inventory for release
  • Pressure temperature
  • Release rate
  • Duration (limited to 600 seconds)

34
Vapour Cloud Explosion ExTool Output Example
35
Vapour Cloud Explosion
36
Total EML Value
  • To calculate Total EML value, other costs
    include
  • 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

37
Total EML Value Calculation in 2008 Example
38
Energy Risk Engineering Reports
39
Energy Risk Engineering Reports What do
Underwriters use them for?
  • Familiarisation with the Risk
  • Location and Nature of Exposures
  • Relative Risk Ranking
  • Values
  • Property
  • Estimation of EMLs
  • PD, BI, MB
  • Identifying Risk Improvement Opportunities
  • Number and Type of Recommendations
  • Insureds Response and Follow-up
  • Input into Commercial Decision Making

40
Energy Risk Engineering Survey Reports Report
Structure
  • Background Information
  • Location
  • Exposures (fire explosion, site boundary, etc)
  • Loss History
  • 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

41
Energy Risk Engineering Survey Reports - Report
Structure
  • Management
  • Organisation
  • Policies, Procedures
  • Manning, Experience, Training
  • Fire Protection
  • Fire Proofing
  • Detection systems
  • Firewater
  • Fixed Protection
  • Mobile Equipment

42
Energy Risk Engineering Survey Reports Report
Structure
  • Loss Estimates
  • Values
  • EML/PML Estimate
  • BI
  • Risk Profile including Risk Ranking
  • Risk Improvement Recommendations
  • New Recommendations
  • Review of Previous Recommendations

43
Business Interruption
44
Business Interruption Insurance
  • Major underwriting concern
  • Small PD can give huge BI exposure
  • BI is being given much more attention by
    Underwriters
  • 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

45
Business Interruption Insurance
  • Bases and Assumptions
  • Gross Profit, Standing Charges
  • Assumed plant throughput
  • Assumed pricing or margin
  • Contingent liabilities
  • Breakdown of BI
  • By site minimum required
  • By key area or process unit preferred
  • Generated by LP if possible
  • BI EML may not be same event as PD EML!

46
Thank You Any Questions?
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