Report shows safety lapses have cost global oil & gas industry $34bn in last 40 years
20 March 2014
The 23rd edition of Marsh’s The 100 Largest Losses report shows that the global energy sector is suffering from the failure of multiple process and safety systems. The report estimates that the global energy sector has sustained property damage losses in excess of $34 billion since 1974, based on current estimated values, with the majority attributable to offshore and refining incidents.
The report estimates that the global energy sector has sustained property damage losses in excess of $34 billion since 1974, based on current estimated values; with the majority attributable to offshore and refining incidents.
The report summarises the 100 largest property-damage losses that have occurred in the hydrocarbon extraction, transport, and processing industries from 1974 to 2013, taken from Marsh’s energy loss and information available in the public domain. The loss database has been used to collect information for more than 40 years, and now has almost 10,000 individual records of losses.
Large property losses have been grouped into five categories: refineries, petrochemical, gas processing, terminals and distribution, and upstream.
According to the report, eight new losses that have occurred since 2011 have entered the 100 largest losses list. These emanated from the refinery, petrochemicals, and upstream sectors, and include explosions, fires, flooding, blowouts, and the sinking of offshore structures. There is, therefore, no single dominant factor in these new losses.
Of the 20 largest losses, eight occurred in the US, three in Europe and two in Brazil. The Piper Alpha explosion in the North Sea in 1988 remains the costliest property damage loss, at $1.81 billion (inflated to December 2013 value).
Andrew George, chairman of Marsh’s Global Energy Practice, said: “The global energy sector is becoming increasingly sophisticated in its approach to risk management, most notably in the deployment of new technologies and in emerging markets.
“However, none of the losses detailed in Marsh’s report should be considered ‘black swan’ events. These accidents generally occurred because of the failure of a number of inter-linked control barriers within process and safety management systems.
“The proper maintenance of these barriers depends not only on them being routinely inspected and audited, but also on senior management’s clear support of the safety processes. Continued risk minimisation in the global energy sector depends on maintaining vigilance on new and developing threats, and forming strategies to prevent and mitigate their impact.”
The report is designed to remind people working in the industry of the range of losses that can occur, the wide range of potential root causes, the fallibility of prevention measures, and the scale of potential consequences.