Mark J. Kaiser

Scrap and Storage Markets in the Gulf of Mexico—III. Process Workflows and Industry Structure

Abstract The scrap metal and storage markets associated with platforms and drilling rigs are one of the least-publicized sectors of the energy industry. Structures, rigs, and marine vessels contribute to scrap supply in coastal communities and is an important sector for many regional economies, but relative to aggregate scrap sources are considered marginal contributors to total supply. In part three of this four-part series, we follow offshore structures through the scrap process and review conditions that affect the competitiveness of regional markets. Factors that impact scrap metal price are examined. We conclude with a brief overview of the industry players in the US scrap market.

Catastrophic Event Modeling in the Gulf of Mexico—II. Industry Exposure and Value at Risk

Abstract The offshore insurance industry has traditionally been defined by a “trader” mentality in which companies have been willing to hold risks without attempting to model or further quantify their risk through technical appraisal. The 2005 hurricane season in the Gulf of Mexico changed this perspective, and underwriters began to control their exposure to contingent losses through policy sub-limits and other restrictions on coverage. The purpose of the final part of this two-part article is to quantify the losses to property damage in the Gulf of Mexico for historic weather events using the Risk Management Solutions Offshore Platform Model®. Value at Risk measures indicate that the financial exposure of Gulf assets is on the order of

Catastrophic Event Modeling in the Gulf of Mexico—I. Insurance Markets and Risk Techniques

60–70 billion in platform and rig exposures not accounting for pipelines and wells. Probabilistic scenarios from storm simulations indicate a 100-year loss estimated at

Newbuild and Replacement Cost Functions

5.7 billion and a 250-year loss estimated at

Review and update of the supplemental bonding formula in the outer continental shelf Gulf of Mexico

7.5 billion for physical damage to platforms and rigs not including business interruption and operator extra expense losses.

Economic limit of field production in Louisiana

Abstract Modeling offshore energy risk presents a special set of design challenges. Actuarial techniques cannot be applied due to the relative infrequency of events and scarcity of historical loss data. Each hurricane is unique, and the response of platforms, pipelines, and rigs in the path of each storm is also unique. To model the low frequency/high severity risk associated with catastrophic events, it is necessary to develop physical models of the event and the manner in which the event creates vulnerability and interacts with infrastructure. The purpose of this two-part paper is to review the goals of catastrophic event modeling and its application to the offshore energy industry, and to quantify the expected losses to property damage in the Gulf of Mexico based on historical storm events. In Part 1, we review the evolution of offshore energy insurance markets and the conceptual stages of model development.

Economic feasibility of using offshore oil and gas structures in the Gulf of Mexico for platform-based aquaculture

Rigs are the primary assets of drilling contractors and their newbuild and replacement costs are frequently required in corporate planning and financial valuation. In this chapter, newbuild and replacement cost functions are derived based on rig class, age and upgrade status, water depth, and other factors using 2010 market data. A U.S. jackup newbuild cost function explained 77 % of the variance in construction cost using water depth, drilling depth and an environmental indicator variable. Water depth was the single best predictor across all models and rig classes. Replacement cost models explained larger proportions of variance than newbuild models but this is likely due to the manner in which replacement cost estimates are performed rather than superior methodologies. A brief discussion of the limitations of analysis concludes the chapter.

Preliminary assessment of the Louisiana Home Energy Rebate Offer program using IPMVP guidelines

To ensure that the government is adequately protected from incurring costs associated with offshore lease abandonment, the Minerals Management Service requires operators to post a supplemental bond if at least one record title owner or holder on the lease does not satisfy a financial strength and reliability threshold. In this paper, we review the objectives of the supplemental bond program and provide a historical perspective of its development. The objectives of a formula-based mechanism are described along with trade-offs that occur in development. Factors that impact US Government decommissioning exposure are highlighted and we present a risk-adjusted bonding mechanism across the three main stages of decommissioning that updates a 20 year old legacy formula. We propose the selection of bonding levels that balance the need of the government to minimise its decommissioning exposure at an acceptable level of risk without incurring an excessive financial burden on owners. [Received: January 6, 2010; Accepted May 26, 2010]