Nigerian insurance companies have upped the ante of their participation in oil and energy insurance business in Africa with the country’s underwriters leading the top five oil accounts on the continent with a whopping N24.6billion.
Analysis of the top five oil insurance accounts in the continent showed that Lasaco Assurance Plc is leading the USAN oil fields with a premium income of $82,922,706.67 (N12.4billion); LeadwayÂ Assurance is holding the ace with the Nigerian National Petroleum Corporation (NNPC) with $48,598,716.47 (N7.2billion) and OML 58 insurance account of $3,138,012.71 (N470.7million) along with foreign underwriter, HSBC; and Guarantee Trust Assurance (GTA) leads on Total Insurance account with $5,939,094.69 (N890,9million) whilst the Kosmos (Tullow) insurance account is being lead by SIC Insurance Company, Ghana and RKH Insurance Services.
Out of 14 African countries that are in the oil and energy insurance business, Nigeria insurance companies still remain the largest of them all as they are actively participating in the oil and energy insurance business in the continent.
Nigeria Total announces that its subsidiary Total E&P Nigeria Limited (TEPNG), operator of the NNPC/TEPNG joint venture with a 40% interest, has launched the OML 58 upgrade project. Nigerian National Petroleum Corporation (NNPC) owns the remaining 60% interest of the joint venture. OML 58 is located onshore Nigeria (Rivers States), approximately 85 kilometres North West of Port Harcourt in the Niger Delta.
The OML 58 Obite gas treatment plant has been on stream since December 1999. The OML 58 upgrade is designed to increase gas production capacity from 10.6 million cubic metres per day (370 mmscfd) at present to 15.6 million cubic metres per day (550 mmscfd), and also increase oil and condensate output by around 15,000 barrels per day bringing the total output to 140,000 barrels of oil equivalent per day.
This project is expected to increase production as from 2011, and will comply with the Federal Government’s â€œFlare Outâ€ regulations, improve safety and extend the life of existing installations as well as enhancing oil recovery.
It will develop more than 280 million barrels of oil equivalent of proved and probable reserves. A second stage of the project is under evaluation in order to develop additional proved and probable reserves (about 230 Mboe) using these upgraded facilities.
The objective of the project is to contribute to meet the growth of domestic demand for gas in Nigeria in line with the Federal Government of Nigeria expectations, as well as to supply gas to Nigeria LNG.
Mr. Ezekiel Chiejina, Director-General of the Nigerian Insurers Association (NIA) debunked the thinking of the NNPC that the local insurance market lacked the capacity to underwrite oil insurance account.
Chiejina assured that that insurance companies in Nigeria have the requisite financial muscle to underwrite oil & gas risks, and have in fact, been doing so.
According to him, â€œApart from the recapitalisation exercise, which increased the capital base of insurance companies and strengthened them for global competitiveness with improved capacity to underwrite insurance of oil & gas, most insurance companies have reinsurance treaties with ‘A’ rated International companies further increasing their ability to underwrite special risks.
“He said: “The recapitalisation exercise saw insurance companies increase their share capital by over 1000 per cent. According to Chiejina, where the magnitude of the risk demanded it, some companies had formed consortium and that had been approved by the National Insurance Commission (NAICOM) to ensure the pooling of resources under one umbrella to write the risks (a typical insurance phenomenon).”
The huge capital available notwithstanding, insurance companies have taken steps such as setting up full-fledged oil and gas departments staffed with professionally trained and qualified oil and gas underwriters.
He explained that the NIA had contributed to the development of this area through organised programmes to build the human capacity for oil and gas underwriting in the country.
NIA chief said that the body was fully convinced that insurance companies had the capacity to underwrite the required local content of oil and gas risks in line with the Federal Government’s expectations. “As we approach 2010 when the local content insurance is expected to move to 70 per cent, efforts are underway to ensure that insurance companies take up the entire 70 per cent of insurance risks in oil and gas.”
Barr. Jimoh Ibrahim, Chairman NICON Group had commended the Federal Government and the National Insurance Commission (|NAICOM) for their support of the insurance industry through the local content policy in oil and gas insurance.”
He said that in the past few years the industry had grown capitalisation by more than 1000 per cent and that is the reason you find underwriting companies such as NICON Insurance in Sao Tome and Principe underwriting oil risks, IGI in Uganda and many Nigerian insurance companies in the West Coast of Africa doing creditably well, it shows the level of corruption in the NNPC system.
According to the NICON chairman, “the NNPC should understand that in the insurance business, you talk of spreading of risks, you take a proportion of the risk you can conveniently underwrite so that when claims arise you can pay since insurance is a global business. The time has come for them to stop this blackmail and support the industry to fulfill the government’s local content policy in insurance.
The Nigerian oil and gas sector plays a very dominant role to the economy in that 90 per cent of the total revenue is from oil and gas production while over 90 per cent of the nation foreign exchange earnings come from the sales of crude oil. The Nigerian Government has set a minimum local content target of 75% by 2010 for all works and contracts to be undertaken in or on behalf of all oil & gas companies operating in the Nigerian oil & gas industry.
This target is fully supported by the oil & gas companies operating in Nigeria. To meet this target, a number of processes are now in place including a contract evaluation and award criteria which favour bids that meet or exceed the minimum local content target. The Nigerian government, via the NCD (Nigerian Content Division) of the NNPC, has issued a list of 23 categories of work which must be executed in Nigeria.