Strong Hurricane in Gulf Of Mexico Could Generate $65 Billion Offshore Energy Loss, Says EQECAT
September 5, 2007
Oakland, California
EQECAT, Inc., a subsidiary of ABSG Consulting Inc. (ABS Consulting), and the leading authority on extreme-risk modeling, said today that a strong hurricane like Camille, a category 5 storm, with a track through the heart of Gulf of Mexico US offshore energy platforms, could generate energy producer damage and loss of more than $65 billion.
"Property damage alone could exceed $35 billion and losses due to business interruption and reduction in production capacity could add another $30 billion to the loss," said Richard Clinton, president of EQECAT. "Industry insured losses are more difficult to estimate due to the changes in allocated insurance capacity, policy terms and limits following the large losses from 2004-2005 hurricanes, but could certainly be in the $15 billion range," Mr. Clinton continued.
"Both the energy industry and the US economy face substantial risks due to Gulf of Mexico hurricanes. The EQECAT Offshore Energy catastrophe model can help exposed parties to better understand and manage that risk," said Mr. Clinton.
The estimates were generated by EQECAT’s new and innovative Offshore Energy model, which was designed specifically for quantifying offshore energy risk.
"EQECAT has developed new modeling capabilities that enable more comprehensive loss estimates for the offshore assets than those previously available. The model takes into account waves and current, wind, tidal surge and mudslides to estimate platform and pipeline damage," said Dr. Mahmoud Khater, EQECAT's Chief Technical Officer. "The vulnerabilities of the different assets were developed by ABS Consulting engineers, leveraging decades of experience in the risk assessment of offshore platforms worldwide. The damage functions were validated using extensive damage and claims data from hurricanes Ivan, Katrina and Rita," said Dr. Khater.
"Perhaps the most innovative aspect of the EQECAT model is the ability to quantify the risk of disruption of product delivery to onshore facilities due to pipeline damage. This assessment is possible through use of a network analysis that considers pipeline connectivity, redundancy and the impact of wave scouring and mudslides to determine residual pipeline capacity after a storm. The program estimates the initial loss of oil and gas product delivery capacity, and also takes into account the time necessary to restore full delivery capability. This is the first model that will enable users to plan for all major aspects of offshore damage and loss," said Dr. Khater.
EQECAT, Inc. provides state-of-the-art products and services to the global property and casualty insurance, reinsurance and financial markets. EQECAT is the technical leader and innovator of catastrophe risk management models that quantify exposure to a range of natural and man-made catastrophic risks.
Through its modeling software platform, WORLDCATenterprise, EQECAT enables clients to quantify and manage the potential financial impact of natural hazards. WORLDCATenterprise includes 181 natural hazard software models for 95 countries spanning six continents. These models are based upon innovative applications of the latest science, engineering expertise, claims and exposure data and advanced mathematics.
EQECAT, a subsidiary of ABSG Consulting Inc., was founded in 1994 and is headquartered in Oakland, California.
For more information, contact:
pr@eqecat.com