DO YOU KNOW IF YOUR COMPANY IS PROPERLY PROTECTED?

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COMPREHENSIVE INSURANCE PROGRAM: THE KEY IN THE HYDROCARBONS SECTOR

Simply purchasing insurance is not enough to ensure a company is protected against the risks it may face, as insurance only covers certain risks and excludes others. Therefore, the key is to have a comprehensive insurance program.

Specifically in the hydrocarbons sector, the value chain, which is broad and complex, encompasses various activities such as:

  • Exploration,
  • Extraction,
  • Refining and Processing,
  • Transportation,
  • Storage,
  • Distribution, and
  • Retail.

These activities are highly risky due to the intrinsic characteristics of hydrocarbons (explosive and flammable), which can potentially cause damage and losses. In addition to these risks, there are specific risks inherent to each activity. For example:

In extraction activities, there is the possibility of a well blowout, which can cause severe damage to people and the environment;

Tanker trucks transporting gasoline or liquefied petroleum gas can cause catastrophic losses in the event of an explosion because they travel through densely populated areas. Pipelines are subject to vandalism to steal hydrocarbons, which can lead to pollution from spills.

To prevent these eventualities, companies implement industrial safety and environmental protection measures through a risk management process. Even so, the possibility of failure always exists, which is why it is extremely important to have risk transfer mechanisms that provide financial support in case of an incident.

Insurance transfers risk and is designed to meet specific objectives. For example:

  • Liability insurance provides coverage for damages caused to third parties, both to their persons and property.
  • Environmental liability insurance covers the costs of remediation or compensation for environmental pollution. Well control insurance, as its name suggests, is designed to cover the costs arising from an accident in a drilling well that causes it to lose control.
  • A company in the hydrocarbon industry is properly protected when it has a comprehensive insurance program that covers all its risk areas.

In the context of the Energy Reform, in which new operators are actively participating and have committed their capital, companies must be prepared to operate in a risky environment, where they will need to adjust their insurance schemes to avoid a reduction in expected profits or even a negative impact on their equity.

At NRGI Broker, we are experts in risk management and comprehensive insurance programs. Contact us; we would be happy to assist you.