WHY ARE THE INSURANCE UNDERWRITERS REVIEWING OUR EXPLORATION WELL RISKS?

Abstract

The increased level of exploration in Australia and New Zealand has resulted in insurance underwriters taking a closer look at the region. A number of unfortunate onshore blowouts during 2003 and 2004 have focussed their examinations to determine whether these were symptomatic, regional problems or just one-off events.

One of the tools being used to determine the level of exposure when insuring a well in Australia or New Zealand is the well risk review. The reviews typically involve an examination of a number of the drilling contractor’s key documents. This allows the reviewer to gain an understanding of the technical difficulty of the well, any environmental impact should an incident occur and the capabilities of all supervisor personnel and the match between the need to drill the well and the capability of the rig and the planning completed. It is the operator’s responsibility to comply with any recommendations that eventuate from the review and failure to do so may void the control of well insurance.

Typically, the underwriters carry the cost of these reviews which have highlighted a possible issue with the competency of rig personnel as the industry grapples with the shortage of experienced people in an expanding market. To complicate the issue for the industry, many of the more experienced personnel are nearing retirement age and suitably experienced replacements are few and far between.

The well risk review process should be seen as complementary to the State regulatory reviews and will, along with initiatives being undertaken by some participants in the industry, contribute to a safer industry with fewer incidents.