Rosa Elena Moran
Senior Adjuster & Consultant
Matthews Daniel
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View from the Top

Risk Assessment and Mitigation for Offshore Industry

Wed, 01/22/2014 - 12:50

Q: What are the main pillars of your involvement in the Mexican oil and gas industry?

A: Matthews Daniel operates as a loss adjustment agent for the insurance industry, and also provides risk assessment through London Offshore Consultants and Marine Warranty Surveyors. Our main clients are insurance companies that provide coverage for public and private sector clients in the energy industry, such as PEMEX contractors. For example, if PEMEX needs to move a platform, or a rig needs to be transported offshore, we can certify the operation in order to minimize the risk of loss. On the risk assessment side, Matthews Daniel makes sure all the right guidelines are being complied with, to minimize or eliminate risk as platforms are moved or constructed. We have been heavily involved in the offshore development of the US side of the Gulf of Mexico, which translates directly to our work in Mexico. Due to existing Mexican regulation, we work a lot with insurance companies involved in the energy industry. However, the insurance market is not large in Mexico, especially on the energy side. Most of it revolves around reinsurance, but there are only a few reinsuring companies that accept the risk of covering energy industry operations. We identify most of these from our base in London and figure out which companies to offer services to. We have also managed claims made by Shell in joint ventures with PEMEX. Overall, we expect that the market diversification following the Energy Reform will definitely bring more work for us.

Q: What risk reduction tools have you applied in the Mexican oil and gas industry and how do you link them to PEMEX’s asset verification and certification standards?

A: Matthews Daniel can offer different kinds of risk reduction tools, depending on the client’s needs. Our firm is mostly focused on the development, construction, transportation, and installation of offshore facilities. For example, we have developed a program that includes a checklist of all the norms that an offshore project must meet to obtain a given certification. All risk is related to the cost that a given party would incur if an asset were to be lost. Therefore, the ideal distribution of risk in offshore operations is 50-50 in a joint venture, just as a firm would share risks 50-50 with an insurance company through the payment of a premium. A company’s risk participation should be directly proportional to its financial participation in a project. Most operational risks come from contingencies, essentially events that they cannot prepare for. As PEMEX operates in accordance with global norms and standards, it can prevent the predictable events and avoid most risks. However, offshore operations, especially in deepwater, represent a risk because of the unpredictability of marine conditions as well as our limited ability to respond to those conditions.

Q: What criteria do you use to assess the risk of possible human error in offshore operations?

A: Our risk assessment activities involve a risk matrix that takes many elements into account. The human error factor is always accounted for. Marine certification does not need this factor to be deeply considered, but pipeline evaluation looks closely at personnel training and the degree to which it complies with the necessary qualifications for the project at hand. Human error causes 95% of accidents, technical matters rarely fail, which means human error is a major factor in our risk matrix. Another factor is the degree to which procedures and processes are followed and how irregularities are notified and addressed. This risk matrix is designed based on the project in question and presents insurers with an understanding of what sorts of claims they will be addressing in the event of an accident. Another factor to be considered when risk is assessed is the state of established infrastructure, which is a matter of alerting our clients of potential causes of accidents. We elaborate a report with pertinent observations and we share it with insurance companies so they know what types of risk they are facing.

Q: What is your main market development strategy in Mexico?

A: We definitely want to expand and diversify our client portfolio. We mostly work with PEMEX and its insurers, and a few contractors. That structure will change after the Energy Reform, and thanks to our international presence we are ready to work with these new operators. We have worked for them before, so they are familiar with the quality of our services. Essentially, what we want to do is to prevent risk for the sake of industry’s health and of both its material and human assets.