Energy sector warned of emerging risk threat after benign two years

COVID has capped the number of major energy losses during the two years 2020-2021.

Marsh has published the latest issue of its 100 Largest Losses in the Hydrocarbon Industry,

Which found the global hydrocarbon extraction, transport, and processing industry experienced a significant reduction in the number of major property damage losses during 2020-2021, due to the combined impact of the COVID-19 pandemic and “well-executed business continuity planning”.

Andrew George, Global Head, Energy & Power, Marsh Specialty, said the market had been robust but it was now faced with new and emerging risks.

“Throughout the COVID-19 pandemic, the global energy industry maintained essential services and supplies amid fluctuating demand, and in the face of many challenges related to people and process risk,” he added. “Building greater resilience to emerging risks in particular is crucial as the energy sector continues to transition and evolve.”

The report details the most significant property damage losses in the global hydrocarbon industry since 1974 (based on asset values on 31 December 2021).

In the 27th edition, only two new major property damage losses enter the top 100. Both were incurred in 2020 totalling US$500 million; a fire and explosion at an oil refinery in South Africa (July 2020), and a fire at an LNG facility in Norway (September 2020). Combined, these incidents amount to the lowest average amount for any two-year period recorded in the report since 1995/1996.

According to the report, concerns of increased losses which arose at the outset of the pandemic failed to materialise, possibly in part due to a reduction in site-based activity and the industry’s effective approach to safe work practices. However, Marsh notes that emerging risks – such as extreme weather events and cyber perils – pose a growing threat to energy assets and security of supply.

Losses not categorised exclusively as energy property damage events – such as the Port Of Beirut ammonium nitrate explosion in 2020, Winter Storm Uri, and the six-day blockage of the Suez Canal in 2021 – are not captured within the analysis. However, the report notes that their impact on the energy industry highlights the need for greater operational resilience and improved process safety practices to reduce the risk of future losses.

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