Energy Review 11-2018
29 November 2018
A month ago we talked about the calm before the storm. The “storm” is now happening and it is turning out to be a bit of a wimp. In the US mid-term elections, President Trump kept the majority in the Senate but with the Democrats now taking overall control in the House of Representatives. Until recently the Brexit outcome seemed to be unknown to Prime Minister Theresa May; she has now secured a draft deal with the EU. The only thing is, will the Parliament approve the deal?
China and North Korea have been quiet and even Iran’s posturing after the imposition of new US sanctions appears to lack conviction. The situation in Venezuela looks more and more dire every day – President Maduro has been accused of getting his hands on the country’s gold bullion while the poor are starving: it is now illegal to attribute a child’s death in hospital to starvation.
The energy world looks to be picking up: BP, Chevron and ExxonMobil have delivered very favourable third-quarter results. Whilst a recent article appeared to be optimistic with the headline Four Things to Do with US$100+ Oil, this month has seen the price of oil stabilised for its longest losing run since 2014. What is encouraging is the report that upstream spending must increase to meet future demand and that the US and Saudi Arabia – more so than other OPEC members – are increasing production accordingly.
Headlines of other welcome developments include: exploration picking up in select UK offshore basins; first oil flows at Norway’s first unmanned platform; Shell Australia and QGC are to drill 250 gas wells in Queensland; BP starts production from Thunder Horse Northwest Expansion; US$43 billion slated for North Sea projects through 2025; the world’s largest offshore wind farm off the Cumbria coast which opened in September is now capable of generating 695 megawatts, enough green energy to power 600,000 homes (about twice as much as New Zealand’s Benmore Dam which was completed about 50 years ago and which, at the time, was regarded as world class).
Insurance carriers are now analysing the claims resulting from the season’s Atlantic and Pacific storms but pricing in the market still remains stable. Brexit is dominating London’s concerns and the lack of news from Downing Street is causing increasing frustration.
Although there have been projections of staff moving to the Continent, the real moves have been in London with names such as Markel, Canopius, AEGIS, AXA/XL and AXIS being mentioned.
We trust our readers will find our news interesting and informative and look forward to any comments or questions you may have.
Equinor shutting down crude oil port after two ships collide
Equinor is shutting down operations at Sture terminal, its tanker port for crude oil in Øygarden, Norway, following a collision between the frigate Helge Ingstad and the tanker TS Sola.
Equinor reported the incident at approximately 04:15 local time on 7th November.
In a statement later that morning, Equinor said that personnel at Sture without emergency tasks will also be evacuated. The shutdown and evacuation were performed as a precautionary measure.
The company added it was in a dialogue with Norwegian authorities and had mobilised emergency resources to assist the police and the Joint Rescue Coordination Centre.
The Sture terminal in the Municipality of Øygarden in Hordaland receives crude oil from the Oseberg area through the 115-kilometre Oseberg transport system from Oseberg field centre, and crude oil from the Grane field through the 212-kilometre Grane oil pipeline (GOP).
The Svalin field was connected via the Grane pipeline in 2014. Crude oil from the Edvard Grieg field has been transported to Sture via the GOP since the end of 2015.
According to a report from Reuters, eight people were injured in the collision between the frigate Helge Ingstad and the tanker TS Sola. The frigate was taking on water and evacuated its crew of 137 and there were no reports of damage to the oil tanker, Reuters added.
Operations were resumed later in the day.
On November 9th 2018 Insurance Marine News reported that salvage was underway with many tugs and SAR vessels in the area.
2017-built, Malta-flagged, 62,557 gt TS Sola is owned by Twitt Navigation, care of manager Tsakos Energy Navigation Ltd (TEN Ltd) of Athens, Greece. It is entered with Britannia Club on behalf of Twitt Navigation Ltd.
Fracking: Second tremor in 24 hours recorded in Blackpool
A second tremor in a 24-hour period has been recorded at the UK’s only active fracking site near Blackpool.
Cuadrilla was forced to halt operations for 18 hours on Friday 26th October after a 0.8-magnitude tremor. Fracking restarted on the morning of Saturday 27th October before a second tremor was detected.
Saturday’s tremor is the 18th in the area since fracking recommenced 12 days earlier. It was too small to be felt above ground and was not categorised as a “red” event by the Oil and Gas Authority, unlike the one on 26th October, because it occurred after operations had finished at 1:00 p.m.
The company only has permission to frack until that time on Saturdays.
The 0.8-magnitude event was about 200 times smaller than the 2.3-magnitude tremor recorded in 2011 which led to fracking being suspended.
After much controversy, the practice resumed at Little Plumpton, the only fracking site in the UK, on 15th October.
If a tremor takes place during fracking operations, anything above 0.5-magnitude is considered a “red event” and requires the firm to stop injecting water and monitor the area for further seismic activity.
A spokesperson for Cuadrilla said: “This is not a ‘red’ incident under the traffic light system operated by the Oil and Gas Authority as we were not pumping fracturing liquid as part of our hydraulic fracturing operations at the time. However, we will, as always, continue to monitor the seismic activity closely and plan to resume hydraulic fracturing on Monday, 29th October.”
All relevant regulators had been informed, they said.
Three protesters jailed for blocking access to the site walked free after the court of appeal quashed their sentences, calling them “manifestly excessive”.
It was revealed earlier this month that the Energy Minister, Claire Perry, had proposed raising the regulatory threshold for tremors caused by fracking as the industry begins to mature.
The Government subsequently denied it has any plans to relax the rules. Oliver Eden, a minister at the Department for Business, Energy and Industrial Strategy, said last week: “There are no plans to make changes to the traffic light system for monitoring induced seismicity.”
Leaks cause 5k barrels of brine to spill at three North Dakota locations
The North Dakota Oil and Gas Division has said a pipeline leak caused 4,050 barrels of brine to spill at a saltwater disposal well south of Williston.
The division said on 22nd October that Oasis Petroleum North America recovered a majority of the brine, which was contained on site.
Also, Murex Petroleum Corporation reported that 650 barrels of brine were released due to a valve leak at a saltwater well south-west of Fortuna in Divide County on Saturday. About 600 barrels have been recovered so far.
In Mountrail County, a valve leak also caused 300 barrels of brine to spill at a well south-west of New Town. The entire product was recovered.
State inspectors were sent to the three sites to monitor clean-up operations.
West Texas pipeline to resume on schedule after spill, company says
Energy Transfer Partners L.P. said on 15th October that a West Texas pipeline would resume operations on 20th October as planned after the pipeline spilled water with non-toxic green dye and residual crude oil near Abilene, Texas.
The spill went into Button Willow Creek and then into Canyon Rock Lake during a recent test, Energy Transfer Partner said. It did not specify when the spill occurred.
The spill involved an undisclosed amount of water, which contained “a very small amount of residual crude oil,” the Dallas pipeline operator said.
The area has been contained, crews have begun cleaning up the spill and no changes have been made to the pipeline’s maintenance schedule, spokeswoman Vicki Granado said.
The West Texas Gulf Pipeline is owned by Sunoco Logistics Partners L.P., which is owned by Energy Transfer.
The pipeline runs from Colorado City, Texas, to Longview, Texas, connecting there to the Mid-Valley long-haul pipeline system that transports crude to refineries in the Midwestern United States.
Standard Club partners with China’s Ping An to underwrite P&I risks
The Standard Club Asia, managed by Charles Taylor Mutual Management (Asia), has collaborated with Chinese insurer Ping An to underwrite protection and indemnity (P&I) risks in China.
Under the agreement, Standard Asia and Ping An Property & Casualty Insurance (Ping An P&C), a subsidiary of the Ping An Insurance Company of China, will jointly offer P&I cover to China’s rapidly-growing ship-owning sector, with a focus on owners undertaking ocean-going voyages.
Ping An P&C said the partnership will allow the company to expand its existing P&I business to cover the growing number of Chinese shipowners with ocean-going shipping operations.
For Standard Asia, the agreement represents part of its growth strategy in China.
60 million barrels of crude oil stolen from Nigeria in three years
Human rights lawyer Femi Falana said on 18th October that around 60.2 million barrels of crude oil were stolen from the country between 2011 and 2014.
Speaking at the 40th anniversary of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Mr Falana noted that the stolen product passed through the Philadelphia Port in the United States of America.
On the revenue losses to crude oil theft, Mr Falana said: “The Nigerian Maritime Administration and Safety Agency (NIMASA) commissioned a study about seven years ago concerning millions of barrels of crude oil which leave Nigeria unaccounted for.
“The study found that between January 2011 and December 2014, 60.2 million barrels of crude oil left Nigeria which were not recorded, but were recorded to have been discharged at the Philadelphian Port in the US.”
“It revealed that the value of the stolen oil amounted to US$12.7 billion. That was oil discharged in just one port. We have identified the oil majors which were involved and we have also identified the shipping company.
“But since 2014, we have been begging the Federal Government to recover the money and nothing has been done. The money lost in USA, India, China and other ports where our oil is discharged exceeds US$100 billion.”
Barbican Syndicate 1955 exits property, marine cargo/hull, PI insurance
Barbican Syndicate 1955 has received approval from Lloyd’s for its 2019 business plan which includes a withdrawal from property insurance, marine cargo and hull insurance, and professional indemnity (PI) insurance.
Syndicate 1955 remains committed to its other business lines and has increased capacity for specialty lines, marine reinsurance and energy.
The syndicate will focus on core markets and will increase its focus on the specialty lines sector, which will make up nearly half of its overall stamp capacity for 2019.
There will be an increase in capacity across a number of specialty lines, including cyber, international and US casualty treaty and healthcare.
Markel make changes to their energy team
With immediate effect, Markel have made a number of team changes within their energy division. The team will be headed by Rohan Davies, as divisional managing director, supported by Stuart Smith as deputy head. The new team will consist of Rohan Davies, Stuart Smith, Ben House, Clifford Blayney, Greg Walters and Tara Swift in London, along with Tim Foister and Aminah Sulaiman in Singapore. Julian Samuel has left the company to pursue opportunities elsewhere.
Norwegian offshore safety body PSA investigations: Kristin & West Phoenix Rig
Kristin audit: Nine non-conformities
Norwegian offshore safety body, the Petroleum Safety Authority (PSA), has found irregularities during an audit of Equinor’s Kristin platform off Norway.
The PSA said that the audit, conducted from 7th to 14th June, took a look at Equinor’s operations within materials handling, use and maintenance of lifting equipment and scaffolding/access techniques.
The safety watchdog also assessed Equinor’s and its contractors’ practices within regular working environment mapping and follow-up of working environment risk, especially for SIP personnel, catering personnel and process operators.
The audit identified nine regulatory non-conformities and six improvement points.
The improvement points were in connection with follow-up of findings after controls performed by an enterprise of competence for lifting equipment, compliance measurement of the offshore cranes and management system for safe use of lifting equipment, and lifting equipment and loading areas.
Other non-conformities regard scaffolding, access techniques, mapping of workload and assessment of the risk of work-related musculoskeletal disorders, noise and vibration, management of the organisational and psycho-social working environment and cooperation between the occupational health services.
The improvement points observed during the audit were linked to roles and responsibilities, competence in the repair and maintenance of lifting equipment, unsecured lifting equipment, cargo deck, marking of the cargo deck and safety marking.
The PSA told Equinor to report on how the company intends to address the non-conformities identified by 31st October.
The company will also deliver an assessment of the improvement points observed.
This is the second audit of the Kristin platform this year following the one carried out from 19th to 22nd March, which was a follow-up of vibration and cable chafing at the platform.
Investigation into West Phoenix rig fire launched
Petroleum Safety Authority Norway (PSA) has also launched an investigation into a fire which broke out on the West Phoenix drilling unit on Monday 5th November 2018.
The safety agency said on Thursday that this incident had occurred in the mud laboratory on the rig.
The fire was extinguished and no personal injuries had been reported as a result of the blaze, the PSA added.
West Phoenix is a semi-submersible drilling unit built to the Moss Maritime CS50 design built at the Samsung yard in South Korea and operated by North Atlantic Drilling. When the incident occurred it was drilling in the Norwegian Sea with Equinor as operator.
An investigation team from the PSA has now started work on the rig, the PSA said.
Its objectives include clarifying the course of events, describing the actual and potential consequences, and identifying the direct and underlying causes in order to contribute to learning lessons and experience transfer.
Equinor, then Statoil, hired the West Phoenix drilling rig back in March 2018 for exploration drilling on the UK and Norwegian continental shelves. The semi-submersible rig was hired to drill an exploration well for the Ragnfrid North license on the NCS, followed by three wells on the UKCS.
The Norwegian well, for which Equinor received safety clearance from the PSA back in June 2018, is investigating a prospect named Ragnfrid Nord, just south of the Kristin field in the central Norwegian Sea.
In the UK, the West Phoenix rig was hired to drill on the Pip prospect, located in the Fladen Ground Spur area in license P2318, and the Bigfoot prospect, located some 30 kilometres south of the Mariner field, in license P2314. The rig was also hired to drill the Verbier appraisal well, which is expected in mid to late Q4 2018.
OMERS sells stake in Lloyd’s insurer Brit
Canadian pension fund OMERS has reduced its holding in the Lloyd’s insurer Brit to 12% after receiving US$264.6 million for a separate 11.2% holding.
Brexit: LIIBA and Fitch Rating reviews
LIIBA outlines key Brexit challenge
The Chief Executive of the London and International Insurance Brokers Association (LIIBA) has told insurance brokers that the key challenge facing them post-Brexit remains the uncertainty around the proposed models for brokers to maintain access to London for European risks.
Speaking at a joint LIIBA-Lloyd’s Brexit seminar recently, Christopher Croft, Chief Executive of LIIBA, said that while yet unconfirmed media reports of a UK-EU financial services deal were positive, the lack of clarity around the Insurance Distribution Directive (IDD) meant that, to date, no European Union regulator had confirmed a belief that a wholesale broking model would be acceptable.
Mr Croft said: “Most regulators are expecting EIOPA to provide clarity for brokers but our understanding is that EIOPA does not intend to do so. This is because the scope of IDD is a matter for the European Commission. However, the Commission is unlikely to do anything that could be seen to be prejudicing the negotiations.”
In order to put the matter before the Commission, Croft asked brokers to keep the London market and its representative bodies apprised of their plans and to continue working closely with the Corporation of Lloyd’s.
Commenting on media reports of a UK-EU financial services deal, Mr Croft said: “These as yet unconfirmed reports that an agreement on market access has been reached are a positive sign – and mirror messages we are getting from both sides of the negotiation.
“But if, as reported, the deal is based on regulatory equivalence we await the detail of how this will cater for insurance intermediation where no such concept exists. We are however hopeful as this challenge was acknowledged by Government when John Glen responded on behalf of the Prime Minister to LIIBA’s letter on the subject.”
On a related note, Mr Croft said he had learned that the German Insurance Buyers’ Association had raised with the German Government the need to access London post-Brexit.
Mr Croft added: “Our message to politicians remains twofold: we need a political solution to contract certainty and we need EU clients to retain access to London post-Brexit. It’s a message we believe is now resonating in some important areas.”
(Article dated 1st November 2018)
UK heading for ‘acrimonious and disruptive’ no-deal Brexit: Fitch
Ratings agency Fitch said on 26th October that it no longer assumed that Britain would leave the European Union in a smooth transition and said a “no deal” Brexit could lead to a further downgrade of its sovereign credit rating.
“In Fitch’s view, an intensification of political divisions within the UK … has increased the likelihood of an acrimonious and disruptive ‘no deal’ Brexit.
“Such an outcome would substantially disrupt customs, trade and economic activity, and has led Fitch to abandon its base case on which the ratings were previously predicated.”
Previously Fitch had assumed Britain would leave the EU in March next year with a transition deal in place and the outline of a future trade deal with the bloc.
But Prime Minister Theresa May has struggled to agree a deal which can secure the backing of Brussels and her own lawmakers in the Conservative Party.
Fitch currently rates British government debt at AA with a negative outlook, which means a further lowering of the rating is possible. Fitch cut its top-notch AAA rating on Britain in 2013, citing the outlook for weaker public finances.
S&P Global Ratings separately affirmed its ratings on the UK, with a negative outlook.
“The ratings are constrained by the uncertainty regarding the UK’s exit from and future relationship with the EU, which in our opinion will have important implications for its economy, its ability to attract inflows of capital and labour over time, and its public and external finances,” S&P said.
Ratings downgrades up to now have had little impact on investors’ appetite for British Government debt, which is still seen as a safe asset at times of political or economic turmoil.
But downgrades are embarrassing for Mrs May’s Conservative Government, which emphasised preserving the country’s AAA rating when it embarked on an austerity programme in 2010.
Fidelis and AXA XL prepare for Brexit in Dublin
Fidelis sets up re/insurer in Dublin to prepare for Brexit: Senior leaders appointed
Fidelis Insurance Holdings Ltd has announced it has established a regulated re/insurer in Ireland, called Fidelis Insurance Ireland DAC (FIID), to take advantage of opportunities in the European Economic Area (EEA) after Brexit.
On 22nd October the Central Bank of Ireland approved Fidelis’ application to write bespoke and specialty insurance and reinsurance, the company said in a statement.
AXA XL gains approval to move EU unit from the UK to Dublin
Re/insurer AXA XL has received authorisation from the Central Bank of Ireland (CBI) to move its principal EU insurance company, XL Insurance Company (XLICSE), from the UK to Dublin in response to Brexit uncertainty.
In September 2017, prior to XL Group’s acquisition by AXA Group, XL had announced its plan to move XLICSE to Ireland ahead of 29th March 2019 when the UK is due to leave the EU.
In the UK, AXA XL will retain XL Catlin Insurance Company UK (XLCICL), and its Lloyd’s of London operations (Syndicates 2003 and 3002).
Apollo launches new £130 million Lloyd’s SPA Syndicate
Independent Lloyd’s managing agency Apollo Syndicate Management Ltd has received “in principle” approval to launch a £130mn SPA Syndicate 1971 to operate alongside its existing Syndicate 1969.
CTMA places Standard Syndicate 1884 into run-off
Charles Taylor Managing Agency (CTMA) has placed Syndicate 1884, which is managed by the business, into run-off.
The Standard Syndicate 1884 offers marine and energy risks with a focus on providing a broad range of cover to the marine and energy industry sectors. The syndicate has been established by The Standard Club, a marine protection and indemnity (P&I) mutual insurer.
Syndicate 1884 offers a range of fixed premium insurance covers for property, casualty and liability risks.
Syndicate 1884’s principal capital provider has decided to withdraw from the Lloyd’s market for the 2019 underwriting year, according to a corporate statement. The syndicate will write live business for the remainder of 2018 and will enter run-off on 1st January 2019.
Charles Taylor Managing Agency intends to manage the run-off of Syndicate 1884.
Charles Taylor Managing Agency is focused on developing its business as a provider of syndicate management and operations.
The managing agency believes there will be increased demand for live and run-off syndicate management capabilities in the Lloyd’s market, which it is well-placed to meet.
Barnabas Hurst-Bannister, Chairman, Charles Taylor Managing Agency said: “We are very confident in the prospects for Charles Taylor Managing Agency, both as a manager of live and runoff syndicates.
“We established the managing agency as a third-party syndicate manager in 2015 and developed up-to-the-minute systems and processes, designed specifically for that purpose.”
Jon Hancock, Performance Management Director, Lloyd’s, said: “Lloyd’s is pleased to continue to work with and support Charles Taylor Managing Agency. We are confident that Syndicate 1884 will be run-off in an orderly and professional manner and that policyholders’ interests will be protected.”
The Standard Club established the syndicate in 2015 to underwrite marine and energy risks. It represented one strand of the club’s broadly-based strategy to provide its members with a wider range of insurance covers to meet their needs and diversify the club’s source of revenues.
The Club remains committed to these strategic aims but it has concluded that current overcapacity and a weak pricing environment have made Lloyd’s a challenging environment for it to develop a profitable underwriting business with sufficient scale.
The club is exploring alternative approaches to provide its members with additional insurance covers, including establishing an underwriting agency, to build on the strong base established through the Lloyd’s initiative.
Marine mutual insurers Standard Club and Strike Club to merge
Marine mutual insurers The Strike Club and The Standard Club are combining their businesses in a move intended to improve the synergies, efficiencies and cost savings in governance, management, underwriting and reinsurance for both the organisations.
The Strike Club is a marine mutual insurance group fully owned by its members. It offers mutual delay cover for the daily operating costs of ships held up by strikes, port closures, collisions, breakdowns and other unexpected delays.
The Standard Club is a mutual insurance association and a member of the International Group of P&I Clubs. It is managed by the Charles Taylor group.
Under the proposed plan, The Strike Club will continue as a member-controlled mutual delay insurer, operating as a class of The Standard Club. It will be supervised by the current Strike Club board, which will become a Strike committee of The Standard Club.
The transaction will enable The Standard Club members access to marine delay insurance while diversifying the club’s underwriting portfolio and risk profile, and further increasing the club’s free reserves. The Strike Club members will benefit from being part of a larger mutual insurer with over US$460 million free reserves.
“Marine delay insurance provides valuable protection to ship owners and operators protecting them from delays outside their control. At a time when the shipping market is facing difficult market conditions and financial pressures, our cover can make all the difference between profit and loss on voyages for operators,” said Alain Le Guillard, President and Chairman of The Strike Club.
“Joining The Standard Club is an excellent move for the club,” Mr Le Guillard added. “It will provide our members with long-term financial stability and S&P A-rated cover, while preserving the independence of operation, identity and other valuable mutual characteristics of The Strike Club.”
Cesare D’Amico, Chairman of The Standard Club, commented: “This transaction is a win-win for members of both clubs. It increases our membership and enables us to offer valuable additional protection to members of The Standard Club. It extends our strategy of offering a wide range of insurance covers to our members and diversifying our sources of revenue.
“The Standard Club will also benefit from increased reserves from The Strike Club. I will look forward to welcoming the members of The Strike Club to The Standard Club.”
People on the Move
Brit Global Specialty taps cyber & technology leader from Beazley
Specialty re/insurer Brit has hired Beazley’s Jeff Norton as Senior Vice President, Cyber & Technology for Brit Global Specialty USA (BGSU).
Mr Norton joins BGSU in Chicago, reporting to Tom Bongi, Executive Vice President, Professional Liability. He will be responsible for leading BGSU’s cyber & technology team. Mr Norton comes from Beazley Group where he was a senior underwriter, private enterprise. He was responsible for leading the US private enterprise cyber offering.
Canopius taps new head of claims from Markel
Canopius has appointed Gabrielle Folliard as Head of Claims from Markel International.
Gabrielle will join in early 2019 and will report to Laurie Davison, Group Chief Operating Officer. She was most recently Head of Specialty and Financial Lines Claims at Markel International.
Specialty re/insurer Canopius has also revealed a series of key appointments to expand its business across the Asia Pacific region.
Mathew Gundersen has been named Head of Operations AsiaPac & MENA, and Paul Hackett as Head of Marine, Energy and Engineering, AsiaPac & MENA.
In addition, Dale Taylor will join as Property Underwriting Leader in December and Matt Bird will join in January as Crisis Management Underwriter for the region. All the executives will be based in the company’s Singapore office.
Earlier in September, the company hired Yann Marmonier as Head of Insurance Asia Pacific & MENA, and recently announced the appointment of Nattakorn Wattanaumphaipong as Head of Reinsurance Asia Pacific.
AEGIS appoints cargo underwriter from Sompo
AEGIS London, a Lloyd’s managing agency and the UK-based subsidiary of AEGIS, has hired James Hyett as Cargo Underwriter.
Mr Hyett joins from Sompo International where he was a marine underwriter. He has previously worked at Lockton and JLT. Based in London, Mr Hyett will report to Richard Palengat, AEGIS London’s Head of Marine & Energy.
AXIS Re taps Thomas Miller COO for global role
AXIS Re has appointed Ann Haugh as President of its global markets division, based in London, and Rob Smart as the Head of Specialty Re.
Ms Haugh joins AXIS Re from Thomas Miller, where she served as Group Chief Operating Officer. Previously, she held a number of senior underwriting and operations leadership positions at Aspen Insurance Group and Zurich Insurance.
In her new role, Ms Haugh will oversee AXIS Re Strategic Partners, global Specialty Re and the international business platform in the Lloyd’s market. She will be a member of the reinsurance leadership team and will report to AXIS Re CEO Steve Arora.
AXA XL names Catlin veteran as London Market Wholesale CUO
AXA XL insurance has named Dan Curran as Chief Underwriting Officer for its London Market Wholesale business.