For the seventh time, Allianz Global Corporate & Speciality (AGCS) published its Allianz Risk Barometer. The data is taken from 1,911 risk experts from 80 different countries and 2,376 answers for 22 industrial sectors. The annual survey examines the most important risks for companies across the globe, for individual regions and countries, and also for specific industries, such as agriculture, manufacturing, and shipping. But what’s the situation in the oil and gas industry?
According to the survey, these are the top risks for the sector this year.
1. Natural disasters
Many plant operators are asking themselves: is damage caused by extreme weather now something we have to get used to? A record level of insured losses, amounting to around 135 billion US dollars in 2017, places natural disasters as one of the biggest risks to the oil and gas industry in 2018, too. The devastating consequences of the three hurricanes Harvey, Irma, and Maria served as a wake-up call. “Recent events have reminded us of how great the social and economic impact of natural disasters can be,” said Ali Shahkarami, Head of Catastophe Risk Research at AGCS. Natural disasters can trigger or contribute to numerous other risks, such as business disruptions.
2. Fires and explosions
Fire and explosion incidents are the second most frequent cause of damage to businesses. It is no surprise that fires rank highly on the risk barometer. Systems that control, regulate, and protect burners can often prevent even more severe consequences. Emergency shutdown systems also prevent hazards in the event of danger to ensure safe operation. This is necessary as the process industry has several critical triggers for fires. Depending on the system, extremely high pressures can build up in closed pipes or tanks. Tank and pipe systems are unable to withstand a certain pressure treshold, which can result in considerable operational damage and pose serious health hazards to employees. In the event of this type of emergency, fire and gas systems should be in place to detect dangerous situations at an early stage. As a result, employees still have enough time to take crucial measures, such as evacuating the plant.
3. Business disruption
According to the survey, business disruption is one of the most prominent business risks for the sixth consecutive year. Regardless of whether the cause can be traced back to a fire or cyber incidents, it usually has serious repercussions for a company. On average, losses as a consequence of business disruptions amount to more then two million US dollars. This is over a third more than the average cost of damage to property. “The consequences of business disruptions are often underestimated,” warns Thomas Varney, ARC Regional Manager at Allianz Global Corporate & Speciality. He also believes that in many cases it is difficult to accurately calculate the financial impact or to identify the cause of the disruption.
4. Cyber incidents
In the future, everything will rely on networking – including the process industry. However, this makes systems vulnerable. Cyberattacks using ransomware such as WannaCry or Petya are disrupting companies worldwide. Respondents are particularly concerned about new threats, such as ransomware. Cyberattacks can lead to severe business disruptions, loss of customers, and damage to a company’s reputation. Therefore, it is hardly surprising that the risk of cyber incidents is growing and appears in the Allianz Risk Barometer 2018 for the sixth year in a row. It is listed as the top risk in 11 different countries. Statistically, every company in this survey has already been affected by cyberthreats or expects to be in the future. Cybersecurity has consequently become an essential part of industrial safety. The international standard IEC 62443 requires separate network levels with defined transitions so that operators are able to protect all key areas: hardware, the operating system, network, and engineering.
5. Environmental risks
Approximately 2,000 incidents are reported annually in the European pipeline network. In the production and processing of oil and gas, even the smallest technical malfunction can have serious consequences – for people, machines, and the environment. A single leak in a pipeline is enough to release pollutants, such as methane gas. Systems for early leak detection can determine the future of a company. Detecting leaks enables operators to not only prevent devastating damage, but also avoid irreparable consequences for their image and reputation.
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Identify Risks and Reduce the Threat They Pose
The oil and gas industry is one of the most demanding sectors in the world. Operators must be able to identify existing risks and take appropriate risk-reduction measures. SIS safety control and related functional safety lifecycle methods don’t only ensure safe production, for example. Certification organizations and insurers also ensure that suitable emergency and preventative measures are taken. Only then is a company insured against unforeseen incidents.
This often presents operators with a time-consuming and costly challenge. Specially trained personnel must be able to operate the safety solution and ensure that the technology always works reliably. This distracts the employees from their core duty: efficient production. One possible solution would be to hand over support for the entire system to experts. These specialists service safety systems over their complete lifecycle, perform regular maintenance, and replace consumable parts. Holistic solutions enable companies to reduce lifecycle costs, prevent disruptions, and reduce unplanned downtime – minimizing the majority of risks that are of the highest concern.