Oil firms are facing a whole new set of business-critical risks they need to be adequately prepared for, warns an expert

Opening the National Oil Companies Conference organised by Marsh, the world’s leading insurance broker and risk adviser, firm’s chief executive officer Dan Glaser told an audience of 400 senior national oil company executives that a new series of risks threatened their ability to operate effectively.

“Ten years ago, operational and legal risks would have been the most significant threat. Operational and legal risks remain important, but some of them seem pretty standard, almost trite representatives of a simpler time,” said Glaser.

“The major change compared to a decade ago is the increase in importance of both political and ‘other’ risks. By other risks, I am referring to the threat of pandemics; climate change; cyber crime; population explosion; the emergence of unified, competing regional markets; nuclear proliferation; religious fragmentation, and cultural shifts,” he added.

“These risks involve large truly catastrophic risk potential, with very little ability for an insurer to evaluate and underwrite. While not every operational and hazard risk has a corresponding insurance solution, one reason I came back to Marsh last year is because our firm always has been the industry’s most powerful engine of innovation.

“Behind the legacy of breakthrough insurance solutions created by Marsh over the years has been a collection of the industry’s most creative minds and their uniform commitment to the clients they serve.”

Glaser highlighted three key issues facing the industry in 2008:

“National oil companies require innovative, cutting edge technology and thought. Yet, there are many obstacles in your way,” he said.

“To name a few, you find yourselves coping with  accessing a skilled labour force. Even when skilled labor is available, oil companies have to meet the rising costs for that workforce.

“Tightening debt markets are making leveraged projects more difficult to accomplish. Also infrastructure shortages, especially steel and concrete – the very components oil companies require to develop their infrastructure – are in short supply and that supply cost is increasing constantly.” – TradeArabia News Service