Corporate Solutions

WGP 107 (18) Offshore Oil and Gas platforms

Eric Brault - Energy Practice Leader PROTECT PREVENT SERVE RESOLVE PARTNER

OFFSHORE OIL& GAS PLATFORMS IMIA WGP 107 (18)

 Part icipant s:  Eric Brault – AXA Coporate Solutions - Chairman  Ma r t in Ka u t h - Partner Re  Mark Mackay - AXA Corporate Solutions  Al a i n Padet - AXA Corporate Solutions  Mik e McMahon - Charles Taylor  Mohamed F. El-Ai l a h - General Ins  Javier Rodriguez Gomez - Reinsurance Consultancy  Roman Emelyanov - SOGAZ Group  Thomas Friedrich – Munich Re  Eve Ong - Helvetia

 Stephan Lämmle – Munich Re – Sponsor

2 PROTECT PREVENT SERVE RESOLVE PARTNER

 Technical description of Offshore Plat forms  Construction process and components  Information needed and Underwriting Consideration  Pure Insurance Aspect s  MPL Considerat ions and Accumulation driving system  Ex am p l e of Loss  Recommendat ions  Conclusion

3 Executive summary

The development of an oil field is a broad complex subject, which needs strong analysis. The Presentation is a overhaul view of the risks assessment, concerning the construction of the offshore platforms. We do not focused on specific subjects such as: Covers of the drilling of wells , risk inherent to the research for new oilfield, operation of the platforms, processes for NG and oil, pressurizing, storage, market absorption and dismantling ...

We pay attention on the risks to anticipate and balance the construction phase, weather and sea condition impact, importance of the , the safety systems, details on the MPL scenarios during the construction, putting in place of the platform and starting of operation phase. The MWS role and his importance is also described. We also described an example of claim, which is a “typical common incident” which may happen during construction period, and give some recommendations to handle the underwriting of cover of the erection and testing.. Technical description1 of Offshore Platforms Technical description General matters and history

• An Oil & Gas Offshore Platform is a which allow one of the following functions: The extraction, the field treatment, the storage, the transfer, the usual functions to which allow people working safety, in a far away isolated sea environment. • The first real platform was the Ke r m a c 16 for the first offshore well drilled unit in 1947.

• The offshore Oil & Gas production is representing 1/3 of the worldwide production

• The units are of different type of design and of construction methods according to: • Their functions and type of field • The weather and sea environment • The expected life and operation time (size of the field) Technical description General matters and history • 3 main types of units are summarizing the functions definition: • Th e MODU: Module Offshore Drilling Unit • The PP: Production Platform, (well heads and process modules) • Th e LQ: Living quarters • MODU: used for drilling and close with caps the preformed wells waiting for the PP arrival • The PP :Are used to re-open the wells which are dedicated to it and operate during time life with necessary process. • The LQ: Includes all facilities for the human being with safety systems.

• The development of field structure includes: • Offshore , with platforms • Systems to carry out the oil or NG, time to time storage (can be pipes or vessels) • Onshore facilities for oil and NG treatment and market to absorb production Technical description Different Types of design - Different uses - Different environments

• 8 types of units are commonly used. The choice is defining according to environmental condition of field

• According to the field location and perspectives of operation/production, are proposing fixed units or floating systems

• Fixed units up to 1000m depth, (1,2, 3, 4)

• > 300m floating units are used (5, 6, 7, 8)

• Field production is really known at drilling results

• Financing of projects needs heavy commitments from companies, with sharing of units. Technical description Field Project Definition What is a field development project?

• A Project is defining with different phases:

 Getting authorization for research in the boundaries limits of an area

 Research, with Seismic Radiography of the area (on site several months), and analysis of results, several years (up to 4 years)

 Decision to go ahead!

 Starting of project with: Fitting of platforms (MODU first) and starting of construction of Production platform, transportation, positioning, developing of project with piping, risers, connections of drilled wells, opening of caps on wells bored by MODU, positioning of other platforms …globally up to 4 to 6 years duration, and huge for local firms

 Operation ==> during 20 years and more

 Stopping and decommissioning of the units Technical description Field Project Definition Project time schedule

MODU Dr i l l i ng

Sub sea

Pl at forms Construction

Export syst ems fitting

Onshore syst ems const ruct ion Technical description Field Project Definition Curves of production

• Questions for UW:

• What is the “PROJECT”?

• What is included in TSI?

• What is the duration of Cover?

• What are we covering?

• Where is the end of Construction? Construction Process2 and Components Construction process & Components Differentiate Field Level components, Platform Elements • Fields components: • MODU drilling and cap closing system, • Production platforms and LQ Platforms • Connection of wells, umbilicals and pipes • Evacuation systems fittings and pipes or others • Complementary treatment plant onshore

• Construction Process of platform: • Shipyard construction and assembling of structures, • Foundations and mooring systems preparation • Towing and siting of platform • Evacuation systems connections • Caps opening and connection…… • Test and commissioning

• Each field is different, with its own designed Items! Construction process & Components Platform components – The supporting structure The Structure itself which support the topsides is built on shipyards

The Structure can be barged and with floaters located in field position . Construction process & Components Platform components – The Topside Functions and components: • MODU drilling : • Drilling systems • Production Platform • Processes systems • Flare • Well connection systems with valves • • Living Quarters Platforms: • Living Quarters • Power generation and distribution system • Electrical Heating system • MEG bulk storage and distribution system • Subsea hydraulic power system MEG: Mono Ethylene Glycol, • Subsea controls interface Dehydration component to • Chemical systems anticipate freezing in offshore • Utilities, platform support systems and process. • Safety systems, etc • Other components For the FPSO the system is • Umbilical, Pipes to the storage adapted to, floating turning • evacuation systems unit with turret Construction process & Components Platform components – The Topside

• The Oil or natural gas are containing impurities and unacceptable elements. • They shall be primary treated to allow it to be transported in good conditions. • Platforms are also containing necessary processes for treatment Construction process & Components Platform components – The Topside

The topsides are built on shipyards with modules coming from different pre-erection sites

The topsides towed with barge and positioned on structure with ballasting of barge

The checking and commissioning will start, safety systems implementation first , and finally the first connections to wells will be ready to be established. Construction process & Components Platform components – The Topside

• The fixed platforms are towed then ballasted at right location. • Different methods are used : All together or structure first then after topside are barged. Information needed and Underwriting Consideration3 Information needed and UW Consideration Information and details which are necessary for UW

Well platform

Production platform

Live platform

Production Platform Oil and NG

Definition of the platform: • Technical description, including the process • Technical description of the boundary limits of the concerned project • Description of the construction method • Localization of the Construction facilities • Explanations on the travel and positioning systems, • Safety and prevention standards for fire and • Constructors, transportation, positioning firms references explosion Information needed and UW Consideration Risk Exposures for underwriting point of view

Underwriter will be concerned by:

1. Policy wording scope (perils covered and extensions dedicated to sea risks), 2. Definition of the scope of equipment to cover (see previous possible variation) 3. External hazards, wells connection… 4. Natural hazards exposure, sea condition VS period of works at sea 5. Project inherent hazards with design details. 6. Concerned Processes 7. Construction methods 8. Transportation systems 9. Sea bed and environment 10. Foundations and anchorages 11. Equipment for construction, mobilization and demobilization Information needed and UW Consideration Risk Mitigation - How to balance the risk? Marine Warranty Surveyor Role*

• The goal of the MWS is to make reasonable endeavour to insure that the risk associated with the warranted operations to which a MWS is appointed are reduced to an acceptable level in accordance with the best practice

•The MWS company will only appoint personnel who are demonstrably competent in terms of qualification and experience to perform the review/approval activity being undertaken in accordance with the MW scope of .

•The MWS will be satisfied so far as possible that the operation are conducted in accordance with: • Recognized code of practice for design and operations. • Best Industry practices appropriate for the vessels, platforms, equipment and location… • Vessels, platforms and equipment being used within defined safe operating limits…

The MWS will make available to UWs: • A schedule of actual and proposed site attendances. • A schedule of certificates of Approval to be issued

*Survey association Nov 2015

THE MWS IS GIVING TO THE UW, A 2nd VIEW ON THE PROJECT, FOR THE DESIGN BUT ALSO DURING CONSTRUCTION AND TRANSPORTATION OF ELEMENTS Pure Insurance4 Aspects Pure Insurance Aspects Risk Analysis per phase – Erection of Structure - Oversize is the bottleneck

• Over size of parts • Tailor made construction • Dedicated construction procedures Pre-erection • Concrete specifications structures

• Shipyards pre erection and specific vessel for • Handling mistakes (on shore erection sites) Exposures • Loading and unloading on dedicated transportation systems

• Property damages from erection on shore and ship-yard • Defective part, defective design, defective workmanship • Handling in harbors Risks • Defective material Pure Insurance Aspects Topsides, Pre-erection weight is bottleneck!

• Over size of parts, as for upstream offshore platforms •Tailor made pre-erection Pre-erection •dedicated erection procedures on Shipyards

• Shipyards pre erection •Handling mistakes (on shore erection sites) Exposures •Loading and unloading on dedicated transportation systems

•Property damages from erection on shore and ship-yard •Defective part, defective design, defective workmanship Risks •Handling in harbors

25 Pure Insurance Aspects piling & fix the jacket! – Complex works - Strong condition!

• Over size of parts, Foundations • Tailor made construction tools Piling, • Dedicated erection procedures preparing • Special grouting and material for salting water positioning

• Sea works uncertainties, Water depth and high pressures under sea, • Positioning • Faulty design or workmanship, Method of work , Scour protection, • Sea bed disturbance impacting pile and jacket installation, • Aggressive external conditions : salty environment, waves, • Unavailability of specialized vessels, for , construction and erection Exposures • Submarine explosions • Act of God • Loading and unloading on dedicated transportation systems

• Property damages from construction off-shore • Defective part, defective design, defective workmanship Risks • Handling in harbors Pure Insurance Aspects Topsides / Platform Transportation, positioning, Size/weight bottleneck!

• Over size spare parts Tailor made transportation Transportation •Tailor made positioning on structure Positioning

• Loading and unloading on vessels • Transport risks - Specialized vessels • Availability of specialized vessels, for each step Exposures • Collision risks • Fire, NAT CAT impacting plants equipment

• Property damage off shore due to handling • Property damage during transport, loading, unloading, erection Risks • Failure in the sea, sinking Pure Insurance Aspects Pipes layering - Connections to tanks and sea shore

• Over size spare parts Tailor made transportation Transportation • Tailor made positioning on structure La ye rin g, welding

• Loading and unloading on vessels • Transport risks - Specialized vessels • Availability of specialized vessels, for each step • Collision risks Exposures • Design / methodology to install pipes : specialized vessels, • Seabed disturbance impacting pipes : drift • Submarine explosion • Act of God

• Property damage off shore due to handling Risks • Property damage during transport, loading, unloading, • Failure in the sea, sinking Pure Insurance Aspects Connections to well and Pre-commissioning

• Human and software, hardware AI involvement Tests & • Tailor made specifications Commissioning

• Assistance Vessel failure • Fire and explosion • Lack or failure of evacuation system Exposures • Collision risks with vessels • Failure of equipment, MB, valves

• Property damage off shore due to human mistake in process • Property damage with partial fire or destruction, delaying of project • Failure in the sea, sinking Risks • Cyb e r Pure Insurance Aspects Definition of the exposure and Layers of Protection

Swiss Cheese Model Pure Insurance Aspects Definition of the exposure Pure Insurance Aspects Definition of the exposure

Major Exposures identified for MPL consideration:

 Risks due to sea condition and consequences Marine Warranty (transportation failure, sinking) Surveyor

 Fire and explosion during commissioning and opening of the wells, at starting of operation, VCE. Blow Out Prevent er MPL Considerations & Accumulation driving 5system MPL Consideration Matrix of Exposures

Detailed Hazards MPL or Loss Scenarios Frequency Severity H M L H M L Kidnap rancor or bomb destroy, Local attacks (e.g. Terrorism, Piracy explosive devices) to destroy platforms are most likely limited to restricted areas/sections. X X Defect Material, Design, erection Valve failure, linkage of NG or oil X X Lifting failure Module colapse X X Fundations, concrete,erection fault Colapse of platformdue to fundations X X Launching,Positioning bad positioning, impossible to connect X X Lifting, erection operations are intrinsically risky given Construction operations special equipments and high rise structures (crane’s X X jib failure). Hazard due to Vicinity Incident on another connected platform X X EQ undersea EQ, weakness of fundations, colapse X X Tempest Typhon or winter strong tempest X X Flood sunking X X Ice, snow, Accumulation of ice on structures X X Marine peril Towing, colisions, helicopter impact X X MB Process failure, Blockages: shaft,ombilical X X Explosion Blow out / VCE, Hydrogensulfide presence X X Fire Leakages, Jet Fire / Pool fire X X Re m a rk: Pure PD view MPL Consideration Matrix of Exposures

Peril Defect (including Explosion / Type of Platfrom Terrorism/Piracy concrete and Vicinity Natural Hazards Marine perils MB Fire VCE foundation) Period Conv.Fixed Shipyard EAR/CAR Compliant Towers Contrete elements Fixed units Gravitary precom Shipyard Piling Foundations and preparing towing and transport Positioning of structure Final assambling of modules Checking and cold test commissioning well Connection Operation rising up

Jacked Legs Shipyard EAR/CAR precom Shipyard Piling Foundations and preparing towing and transport Positioning of structure Final assambling of modules Checking and cold test commissioning well Connection Operation rising up MPL Consideration Matrix of Exposures

Peril Defect (including Explosion / Type of Platfrom Terrorism/Piracy concrete and Vicinity Natural Hazards Marine perils MB Fire VCE foundation)

Semi Sub Shipyard EAR/CAR Floating units Tension Leg Contrete elements SPAR precom Shipyard Piling Foundations and preparing towing and transport Positioning of structure Final assambling of modules Checking and cold test commissioning well Connection Operation rising up

FPSO Shipyard EAR/CAR Contrete elements precom Shipyard Piling Foundations and preparing towing and transport Positioning of structure Final assambling of modules Checking and cold test commissioning well Connection Operation rising up Accumulation driving system Natural Hazards but not only!

• Several companies on the same area, and same field/platforms.

• Strong tool with high data quality level following up, for day to day monitoring of company commitment.

• Example Berkut rig 12B$ at 100%

• Reinsurance triggers, (ie per loss, per event, per risk, and agg.) are key issues for the registration system

• Anticipation is necessary

• Scenarios and alternatives shall be explored Loss6 Example Example of loss Medium loss

Module fall into salt water during unloading from transportation barge to pre- erection shipyard due to human mistake, pad eyes welds done on sheet casing instead on steel structure framework.

Module was recovery in 20m depth water: Replacement costs USD 15,000,000 Wording WELCAR 2001 Example of loss Medium loss

• Who was responsible? • Wh at is their status in the project? • Wh at is the extent of their liability, if any? • Is there a ‘defective or faulty workmanship’ issue to be addressed? • If so, what is the defective part and what are the costs associated to rectifying the defective part?

US$5,000,000 costs of installing the replacement module at the final location offshore North Sea. The lead time to fabricate a replacement module was 3 months and would have delayed sail away of the topside by 2 weeks. It is estimated that the Insured would have incurred an additional US$ 10,000,000 in hire charges for having the heavy lift vessel on standby for the 2 weeks.

• Is the additional cost of installing offshore reasonable and should it be included in the adjusted claim? Recommendations7 Recommendations

To be in position to handle the construction risk in a good shape, some subjects shall be carefully weighed:

1. Phasing and technical documents are mandatory 2. Split of client shares and their exposures 3. Respect of the prevention procedures (according to standards) 4. Existing Time schedule 5. Clear definition of insured project, values, processes, surroundings 6. Fire fighting facilities analysis with project fire risk 7. Natural hazards exposures, and more generally sea conditions. 8. Vicinity risks, (other platforms, harbours, vessels and seaways) 9. Temporary vessels and equipment 10. Partial hand over expectation 11. Evacuat ion syst ems 12. Existing/requested wordings 8Conclusion Conclusion

Complex risk which need a specific approach

1. The risk study is fascinating and not easy to handle as a lot of factors are impacting the projects.

2. A pragmatic approach with all criteria analysis is necessary

3. The Segmentation of clients with different type of covers is a necessity

4. Taking into account the values, in handling, the oversizing and high speed of project works, Offshore platforms are not “as been” systems and will remain strong challenges for and Underwriters.

5. Major recommendation is to require maximum information to bellow uncertainties and keep good sense of business. Conclusion

As Conclusion, the Global platform subject needs a wide range of complementary studies such as:

 Operation and risks during live time, maintenance approach an consequences  Well boring risks, caps reopening end close and on board, …  Environmental issues on petrochemical offshore risks  Management of the accumulation of commitments for Insurance and reinsurance companies  Corporate responsibility in oil and gas industry, transition from fossil to green energies, role of the Insurer (Re), Dismantling or let them as wrecks!

 Risk in decommissioning and dismantling of units, the revamping… Thanks’ for your attention Acknowledgements:

Information Sources & Bibliography: acknowledgement for free using of Constructors explanation pictures & information from,

• Offshore code of Practice VdS 3549 en: 2014-01 (01) • “Introduction to Offshore Structural ” By: PerIvar Lokstad, Senior Structural , Ph. D (Marine , Norwegian Institute of Technology, Norway), Technip Geo-production (M) Sdn Bhd, Malaysia Khairudin Ahmad, Senior , M. Eng. (, Cornell University, USA), Technip Geo-production (M) Sdn Bhd, Malaysia

• Shah Deniz 2 Project ; “Environmental & Socio-Economic Impact Assessment: November 2013 Final Issue • Pictures of: “The Piltun-Astokhskoye-B (PA-B)”, the largest platform of the Sakhalin-2 project • https://www.connaissancedesenergies.org • “Fire and explosion modeling on off-shore oil and gas platforms”, Doctoral Thesis. Submitted in partial fulfillment of the requirements, for the award of Doctor of Philosophy of Loughborough University. By Jeni Louise Lewthwaite - April 2006 Loughborough University Institutional Repository • Birch, A. D., Brown, D. R., Cook, D. K. and Hargrave, G. K., Flame Stability in Under expanded Natural Gas Jets. Combustion and Technology, Volume 58, pp 267-280,1998. • Birch, A. D., Brown, D. R., Fairweather, M. and Hargrave, G., An Experimental Study of a Turbulent Gas Jet in a Cross-Flow. Combustion Science and Technology, Volume 66, pp 217-232,1989. • Lees, F. P., Loss Prevention in the Process Industries. Butterworth Heinemann, Reed Educational Publishing Ltd, Second Edition 1996

47 Acknowledgements:

Information Sources & Bibliography: acknowledgement for free using of Constructors explanation pictures & information from,

• “Swiss Re Underwriting Offshore Energy Risks” Swiss Re Centre for Global Dialogue Gheistrasse 37 8803 Ruschlikon - 2016 by David Sharp & Rick Perdian

• “An Overview of Design, Analysis, Construction and Installation of Offshore Petroleum Platforms Suitable for Cyprus Oil/Gas Fields” by Kabir Sadeghi, GAU J. Soc. & Appl. Sci., 2(4), 1-16, 2007 Girne American University, Department of Industrial Engineering, Mersin 10,

• “Introduction to Energy Insurance” by Gard AS, Arendal 21 October 2010

• “Construction of an Offshore Petroleum Platform” By O. A. Muyiwa & K. Sadeghi Girne American University, Faculty of Engineering & , Mersin 10, Turkey

• Pictures from : Total, Tennet, BP, Sakhalin, Pertamina, Kvaerner, Exxon

• webside: www.connaissancedesenergies.org

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