Oil and Gas Insurance
Lessons for East Africa
31-Jul-17
East Africa Market
Outlook
Trends in Oil and Gas in East Africa
Recent discoveries in oil and gas across the East African region have brought new
focus on upstream activities
Discovery of oil in Uganda in 2006. Resources in
place: 6.5B barrels. Recoverable reserves: over 1.4
billion barrels. Bid round ongoing.
9 oil discoveries with 2C 616M and 3C 1.29B
barrels. 3 gas discoveries with one estimated to
have about 1.8 Tcf of natural gas and the other
about 25m net pay.
Exploration ongoing. Methane gas
production in Lake Kivu. Policies being
developed.
Exploration at its early stage. Western
arm of the East African Rift System.
Over 53 Tcf of Natural Gas discovered.
Gas monetization projects in top gear.
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The opportunities for local insurance companies in oil and gas sector cut across the
segments
Upstream
Off-shore Wells
On-shore Wells
Central Processing,
Storage
Field Processing, Gathering
Systems
Downstream
Midstream
Distribution &
End-Use
Pipeline Transport
Residential
Consumers
Commercial Consumers
LNG Transport
Industrial Consumers
LPG
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Electric Utility
Consumers
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These opportunities also traverse the related goods and services supply chain
INDIRECT SERVICES
• Mostly available and well serviced in EA
• Not very specialized but requires some expertise
• Need to improve standards
• Some investment required ($)
Emergency Services
Hotel/Accom.
Communications
Custom
Clearance
Camps/Accom.
Environmental Services
Field Construction
Construction
Materials
Catering
Civil
Well
Services
Seismic
Services
Electricals
Rig
Hire
Feed
Office
Supplies
Telecoms
Unskilled
Labour
Infield
Transport
Training
Mud/
Cuttings
Infield
Services
Freight Forwarding
Waste Management
Personnel
Transport
Security
Crane Hire
Inspections
Int. Freight Services
Medical
Site Prep.
Tangibles
Mechanical
IT Services
Specialist
Trades
FPSO/Wellhead
Spare
Parts
HR
Fuel
General Trades
Facilities
Management
DIRECT SERVICES
• More specialized
• Stringent compliance to safety and operational standards
• Requires significant investment ($$)
• Not widely available in EA
SPECIALIST SERVICES
• Highly specialized
• Strictest standards for operations and safety
• Critical services (mistakes ground operations and increase
losses exponential)
• Heavy investment in service provision + R&D ($$$)
• Not available in EA
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Closer Look
Lessons from Nigeria
Nigeria: timeline of selected Oil & Gas sector developments
1958
First oil
(~ 5,000 bopd)
1956
First commercial
discovery
1971
Joined OPEC
1972
ranked 7th largest
producer globally
1977
Established
NNPC
1995
1st petroleum pool
plans begin +
collapse
1999
2nd attempt with
60 companies –
not launched
2003
Insurance Act
passed
2010
Nigerian content
law passed
2007
NAICOM raises
capital requirements
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2011
NAICOM
publishes
guidelines
2012
NOGIP with USD
20M capacity
launched
2015
Pool with Africa
Re as manager
launched
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Some basic statistics on how the local insurance sector has been developing
No. of Companies
• 108 -> 59
Insurers
NNPC
• 4 -> 2
• ~30
Re-insurers
• 55%
O&G
• 45%
CAPTIVE
LOCAL
• ~USD 74M
NON-LIFE
Top 10 companies cover 75%
Retention Rates
• 10%
2010
• 30%
2013
• 60%
2015
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Challenges exist in the prospects of underwriting insurance for oil and gas locally
Regulatory
frameworks
High capital base
requirements
Coordination issues
with innovative
solutions such as
pools, etc.
Limited technical capacity to assess risks,
limits, and other considerations for
underwriting
Industry
arrangements
especially offshore
require global
solutions
Concerns with
integrity and
ethical practice
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Lessons for East Africa
Regulatory frameworks need to be clear +
regulator is key
Services become localized and insurance follows
Role of the national oil company in development
of local retention is important
Some areas will have to remain global in nature
(100% might be harder to achieve)
Local content law opens the door (significant
improvement) but competency + capacity still
matter
Business rules still apply – returns have to be
right, successes will become targets
© 2015 KPMG Kenya, a registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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© 2015 KPMG Kenya, a registered partnership and a member firm of
the KPMG network of independent member firms affiliated with KPMG
International Cooperative, a Swiss entity. All rights reserved.
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