BP Oil Spill Is a `Game Changer' for Insurance Coverage, India's ONGC Says
Insurance costs for oil companies are set to rise “exponentially” after the BP Plc spill, the worst oil leak in U.S. history, the chairman of India’s biggest energy explorer said.
“This spill is going to be a game changer,” R.S. Sharma of Oil & Natural Gas Corp. told reporters today in New Delhi, where he was attending a conference. “Insurance costs are going to go up exponentially around the world.”
ONGC, which insures its oil operations on an annual basis, spent $30 million prior to the BP spill in the Gulf of Mexico to cover its offshore assets for the year ending March 31, 2011, Sharma said. That could have been three times higher had ONGC renewed the policy after the incident, he said.
State-owned ONGC insured its offshore assets, including rigs and platforms, with a group of four companies led by United India Insurance Co., the explorer’s Finance Director D.K. Sarraf said by telephone today. The offshore assets are valued at $26.5 billion, he said.
“This insurance premium will most likely go up next year,” Sarraf said. “After the BP accident, it has to for all explorers around the world.”
Insurance for ONGC’s onshore operations was renewed after the spill, and cost 88 percent more than it did the previous fiscal year, Sharma said.
The BP spill has polluted at least 140 miles (225 kilometers) of shoreline, reduced offshore drilling in the U.S. by half, menaced tourist beaches in four states, and cost the London-based company more than $1.2 billion.