London, 1 February 2010 – The world’s national oil companies (NOCs) could be in a position to benefit from lower overall costs of risk over the next few years according to Marsh, the world’s leading insurance broker and risk adviser. Based on a lack of natural catastrophes, plentiful insurance capacity and more sophisticated risk management techniques, NOC’s insurance costs could be up to 20% less for both the refining (downstream) and exploration & production (upstream) sides of their businesses. Companies involved in both onshore and offshore energy construction projects also stand to benefit from current market conditions.

"A decline in global demand for energy combined with fewer natural catastrophes and enhanced risk management techniques provide NOCs with opportunities to save substantial amounts on their insurance spend over the coming two years,” said Jim Pierce, Chairman of Marsh’s Global Energy Practice. “When energy demand begins to increase and NOCs re-examine previously shelved infrastructure projects, this could lead to substantial savings.”

Assuming there are no major catastrophes, Marsh expects to see a decline of between 10% and 20% by June this year for exploration & production insurance cover, with a further reduction of 15% by June 2011. For the refining, or downstream, side of the business, the reductions will be even more pronounced with reductions of up to 25% by June this year and a further 10% by June next year.

Marsh also expects insurance rates for both onshore and offshore construction projects to decline 5% by June, another 5% by January next year and a further 10% to 15% by June 2011.

"While this news will be welcomed by all NOCs, companies that have established the highest levels of risk management will benefit the most,” Mr Pierce added. “Energy insurance underwriters increasingly want to see highly detailed risk management plans before they offer the best terms. Further, the NOCs that better manage total cost of risk, which is the combined cost of retentions and premiums for actual risk transfer, will be the ones that benefit most from the surfeit of underwriting capital available in the 2010-2011 energy insurance market.”

In order to advise NOCs on how best to cope with the increasingly complex risks they face, Marsh is holding its third National Oil Companies conference, in Dubai in late February.

Launching the agenda for the conference, Mr Pierce said: “NOCs have never faced such a complex risk environment. Delegates to Marsh’s conference, the world's only risk advisory forum designed solely for the world's NOCs, will hear industry leaders address a range of the most pressing issues facing the industry. These include the impact of climate change – especially in the wake of the Copenhagen summit – and the challenges of resource scarcity, as well as how best to manage the strategic, operational and political risks to which NOCs are exposed. They will also hear how to get the most value from their spend on insurance.”

Speakers at the conference include Brian Duperreault, President and CEO, Marsh & McLennan Companies; Dr. Anthony Knap, Senior Scientist, Bermuda Biological Station for Research; Petri Pentti, Group CFO, Emirates National Oil Co. (ENOC); Claiborne Deming, Retired President and CEO, Murphy Oil; Matthew Simmons, Chairman Emeritus, Simmons and Company International; Dr José Manuel Carrera, Managing Director of Risk Management, Petróleos Mexicanos (PEMEX); and, Herman Franssen, Senior Associate, Energy and National Security Program, Center for Strategic and International Studies (CSIS)