Our proposed project topic involves the discussion of the Oil Drilling and Oil Services industry in relation to the question of insurance. The main accents are made on analyzing the characteristic features of the Oil Drilling and Oil Services industry in the United Arab Emirates (UAE) and on the examination of the laws and regulations which can be used regarding the oil industry insurance.
Purposes
The main purpose of the research project is to explore the insurance issues which are associated with the Oil Drilling and Oil Services industry with references to the United Arab Emirates’ settings and local companies.
It is necessary to investigate the function of Risk Management and Risk Transfer mechanisms in relation to the laws and regulations which are used regarding insurance issues within the Oil Drilling and Oil Services industry.
It is important to analyze the role of insurance in the development of the Oil Drilling and Oil Services industry in the United Arab Emirates and examine its basic principles in the local and international context with references to comparing the situation in the UAE with the insurance policy used in the oil industry globally.
Background
The economy of the UAE is predominantly based on the Oil Drilling and Oil Services industry which influences the annual changes in the United Arab Emirates’ gross domestic product. That is why, all the questions which are associated with this industry are strictly regulated by the definite standards, norms, and laws to provide a secure market within the industry. The activities within the Oil Drilling and Oil Services industry are connected with a lot of challenges, and the most significant among them are the challenges associated with the insurance issues.
The main task of those managers who are responsible for the questions of security is to provide the possibilities for predicting and overcoming the insurance issues with references to the specifics of the regulations and laws related to the insurance systems in the United Arab Emirates (Davidson).
The development of the insurance system in relation to the Oil Drilling and Oil Services industry in the UAE started in the 1970s as a result of the industry’s progress which was associated with a lot of risks. In spite of the fact the most dangerous accidents within the industry were characterized by other countries, the insurance industry in the UAE became to develop quickly to prevent the possible risks. The insurance companies oriented to the Oil Drilling and Oil Services industry focused on property insurance, extra insurance, and loss to physical assets. The issues of safety and risks of blowouts were determined among the most influential challenges. Moreover, modern insurance companies propose umbrella coverage and intensive liability protection to overcome the possible risks.
The Oil Drilling and Oil Services industry is based on different technological processes which are connected with a variety of industrial risks which should be discussed from the perspective of the insurance questions. The process of functioning of definite units used in the industry such as pipelines, pumping stations, plants, and tank farms should be regulated with references to the definite norms the main task of which is to prevent the realization of risky situations which can lead to making harm to employees or to destroying properties. In spite of the fact, the company develops the safety programs, such risks as an explosion, the equipment damage, the changes in the high temperatures or pressures, the environmental issues exist, and they should be controlled and operated, basing on the certain insurance system (Suleiman).
Moreover, the usage of new technologies in order to strengthen the company’s capabilities often increases the risks for damaging properties and for workers’ life. That is why it is necessary to develop the insurance programs also with references to these issues. Thus, the work with insurance issues is closely connected with developing the safety standards of any company which functions within the Oil Drilling and Oil Services industry (Davidson).
It is possible to determine several leaders within the Oil Drilling and Oil Services industry in the United Arab Emirates which policies and principles should be discussed with references to the insurance issues. Abu Dhabi National Oil Company and the related ADNOC Group of Companies are the most influential drilling companies in the Middle East (“Abu Dhabi National Oil Company”). The approach to overcoming the insurance issues is correlated with the company’s status, and it should be paid much attention to providing the workers’ safety and healthy working conditions in the company. Moreover, the questions of the environment protection and safeguarding assets are also discussed as influential for determining the company’s path.
The next company which can be examined with references to insurance issues is the Emirates National Oil Company (ENOC) which is controlled by the Government, and it operates in Dubai and the Northern Emirates of the United Arab Emirates (“The Emirates National Oil Company”). It is important to compare the ways according to which the insurance issues are resolved in the ADNOC Group of Companies which operates in Abu Dhabi and in the Emirates National Oil Company. The policies and insurance issues of most influential companies such as the ENOC and ADNOC can be compared and contrasted with the privately-owned company Crescent Petroleum which has the long history of its development from 1971 (“Crescent Petroleum”).
Scope and Research Methods Used
To provide the necessary research in the field of the Oil Drilling and Oil Services industry in relation to the insurance questions, it is important to examine the research question from several perspectives, concentrating on the particular features of the insurance industry and its role in the UAE with references to the general regulations and requirements and from the point of the specifics of the insurance issues discussed regarding the Oil Drilling and Oil Services industry in the United Arab Emirates.
The questions of insurance within the Oil Drilling and Oil Services industry should be examined with paying much attention to the particular features of the UAE insurance industry itself and to the requirements and regulations according to which it is possible to resolve the insurance issues which are challengeable for the companies within the oil industry. These questions should be also discussed with references to the laws spread at the territories of the UAE and in the free zones (Peng).
Moreover, it is significant to pay attention to the fact that Dubai and Ras Al Khaimah depend on their own court systems. One of the major points of the Insurance Law is the aspect that United Arab Emirates companies must not be insured with those insurance companies which are not located in the United Arab Emirates and can be discussed as foreign ones. The contemporary Insurance Law covers such aspects as the company’s capital and property, employees’ life, and liability, meeting the requirements of all the companies in relation to the possible risks, including the companies within the Oil Drilling and Oil Services industry (Radetzki).
To have the opportunity to examine the risks and insurance issues with references to the definite company, it is important to conduct the interviews with the executives of the companies related to the Oil Drilling and Oil Services industry and with the persons who are responsible for resolving the questions associated with the Risk Management and Risk Transfer mechanisms. The research’s conclusions should be based on the qualitative analysis of the information provided by the interviewee in order to determine the most typical insurance issues associated with the industry and the most effective ways to predict and prevent these issues in relation to the safety and insurance system and regulations.
The availability and affordability of the insurance products can be examined with references to the reinsurance issues which are characteristic for such companies as, for instance, Abu Dhabi National Oil Company, the Emirates National Oil Company, and Crescent Petroleum. Furthermore, it is necessary to discuss the controversial questions with references to the experience of the international companies which operate in the oil industry worldwide. Transocean Ltd. is one of such companies, and it is based in Switzerland, but its offices are located not only in Switzerland but also in the USA, Brazil, and other countries. In 2010, the company’s offshore oil drilling rig Deepwater Horizon was destroyed because of the geyser’s eruption and the following explosions. Eleven workers were killed and many employees were injured.
The main insurance issues are connected with the problem that the staff was international, the safety requirements were not followed directly, and the accident resulted in the large oil spill. Thus, the Deepwater Horizon incident cost from $2 billion to $3 billion (“The Ongoing Administration-Wide Response”). This incident which led to the largest environmental disaster in the USA during the 2010s should be analyzed carefully in order to develop the programs to prevent similar incidents in the future. It is also possible to refer to the earlier accidents such as the blowout of Ekofisk Bravo Platform operated by Phillips Petroleum Company in 1977. The insurance issues were connected with the problem that human errors caused the accident (“Ekofisk Bravo”).
It is also important to focus on the problem of reinsurance with references to the Deepwater Horizon accident. The practice of reinsurance can be defined as the provision of the necessary insurance for the insurance company which has significant losses connected with its definite contract by the third party. Companies became to use reinsurance actively in the late 1990s as a result of definite global accidents.
This practice was also important for the Oil Drilling and Oil Service industries because of the high level of potential risks for companies. Thus, the insurance losses caused by the Deepwater Horizon accident were extremely large that is why the main accents were made on the additional reinsurance to decrease the risks and losses. The situation influenced the development of the reinsurance market within the Oil Drilling Industry, affecting the increase of liability insurance and discussion of more risks associated with Oil Drilling and Oil Service industries (“The Ongoing Administration-Wide Response”).
It is important to refer to the statistics of the accidents connected with the insurance issues which happened within the oil industries worldwide. The concentration on this aspect is important for determining the most problematic points the solution of which can contribute to the increase of the general level of safety and productivity according to the insurance issues. Thus, it is possible to refer to the insurance events which happened locally and internationally (Yee). It is significant to analyze critically the causes of accidents and use their outcomes to develop the programs and insurance systems to predict further accidents and overcome their consequences successfully.
Works Cited
Abu Dhabi National Oil Company (n.d.). Web.
Crescent Petroleum (n.d.). Web.
Davidson, Christopher. Abu Dhabi: Oil and Beyond. USA: Columbia University Press, 2009. Print.
Ekofisk Bravo (n.d.). Web.
Peng, David. Insurance and Legal Issues in the Oil Industry. USA: Springer, 1993. Print.
Radetzki, Marian. A Handbook of Primary Commodities in the Global Economy. USA: Cambridge University Press, 2010. Print.
Suleiman, Alef. The Petroleum Experience of Abu Dhabi. UAE: Emirates Center for Strategic Studies and Research, 2008. Print.
The Emirates National Oil Company (n.d.). Web.
The Ongoing Administration-Wide Response to the Deepwater BP Oil Spill. 2010. Web.
Yee, April. Hard Lessons from Oil Industry Accidents. 2012. Web.