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Hurricane IVAN – Lessons LearnedEnergy Loss Adjusters Perspective
Bryan C. Johnson
I. Lessons Learned - Adjustment Process
II. Lessons Learned - The Storm
Lessons Learned - Adjustment Process
Issues Regarding Reserve EstimationSupply and Demand Effects on Oil & Gas Prices
Ivan
Lessons Learned - Adjustment Process
Issues Regarding Reserve EstimationSupply and Demand Effects on Oil & Gas Prices
Service and Equipment Price Spikes (Inflation) Following Catastrophic Loss
Lessons Learned - Adjustment Process
Ivan
Lessons Learned - Adjustment Process
Ivan
Lessons Learned - Adjustment Process
Ivan
Lessons Learned - Adjustment Process
2005 worldwide mobile rig demand forecast
400425450475500525550575600
Jan-
05
Feb-
05
Mar
-05
Apr-
05
May
-05
Jun-
05
Jul-0
5
Aug-
05
Sep-
05
Oct
-05
Nov
-05
Dec
-05
Month
Rig
s
Demand Market Total
Lessons Learned - Adjustment Process
Issues Regarding Reserve EstimationSupply and Demand Effects on Oil & Gas Prices
Service and Equipment Price Spikes (Inflation) Following Catastrophic Loss
Time Delays due to Unavailability of Contractors
Lessons Learned - Adjustment Process
Lessons Learned - Adjustment Process
Issues Regarding Reserve EstimationSupply and Demand Effects on Oil & Gas Prices
Service and Equipment Price Spikes (Inflation) Following Catastrophic Loss
Time Delays due to Unavailability of Contractors
Under-estimated Reserves if Using Established Prices
Lessons Learned - Adjustment Process
Lessons Learned - Adjustment Process
Issues Regarding Reserve EstimationSupply and Demand Effects on Oil & Gas Prices
Service and Equipment Price Spikes (Inflation) Following Catastrophic Loss
Time Delays due to Unavailability of Contractors
Under-estimated Reserves if Using Established Prices
“Seat of the Pants” Engineering
Range of Estimates
Underwriters might use worst case until clarity on extent of loss
Lessons Learned - Adjustment Process
ProbableHighLow
$53.5 MM$60.5 MM$43.75MMTotal Estimated Costs of Recovery and Repair
$12.0 MM$13.0 MM$12.0 MMSue & Labor Expense
$41.5 MM$47.5 MM$31.75MMTotal Physical Damage Estimate Range
$3.0 MM$4.0 MM$2.0 MMStructural Damage
$4.0 MM$5.0 MM$2.0 MMControl Room/Lower Rooms/Water Damage
$1.5 MM$1.5 MM$.75MMMain Crane
$4.0 MM$5.0 MM$3.0 MMSubstructure/Drilling Floor/Derrick
$6.0 MM$7.0 MM$4.0 MMJacking System Repairs
$23.0 MM$25.0 MM$20.0 MMLeg/Spud Can Repair/Rebuild
Lessons Learned - Adjustment Process
Range of Estimates
Range of Estimates
Underwriters might use worst case until clarity on extent of loss
Salvage values can be surprisingly good to help loss situation
Lessons Learned - Adjustment Process
Salvage Value – Damaged Drilling UnitExample:
CTL $45.5 MM
IV $19.5 MM
Total $65.0 MM
Salvage Value ($26.0 MM)
Net $39.0 MM
Lessons Learned - Adjustment Process
Information / Cooperation from Assured
SEC concerns
Catastrophes can affect stock price
Lessons Learned - Adjustment Process
Expert ResourcesOld vs. New DamageMetallurgical ExpertsFailure Analysis Experts Reservoir Engineers (LOPI ) Salvage
Lessons Learned - Adjustment Process
Recoveries - Good Money After Bad?Time & Material vs. No Cure – No Pay
Example: Jackup Legs – Rigs to Reef
77’Leg Penetration
477’Total Leg Le ngth
301’Water Depth
+/-47’Air Gap
49’Hull & Jack House
3’ Leg Above Jack House
Lessons Learned - Adjustment Process
Business Relations / Economics of Assured
Priority Conflicts
Decisions can be based upon Assured’s business or economic issues as opposed to minimizing claim:
Ex: drilling contractors/other contractors left on standby
Properties which have greater impact on bottom line may be priority - not necessarily insured properties
Lessons Learned - Adjustment Process
II. Lessons Learned – The Storm
IVAN
Hurricane KATRINA
Hurricane IVAN
KATRINA, 2005 IVAN, 2004
Lessons Learned – The Storm
Hurricane KATRINA
Hurricane KATRINA
Lessons Learned from the Storm ItselfMud Slides: Freak Occurrence or Expected Peril?
Lessons Learned – The Storm
Mississippi RiverDelta
New Orleans
Mobile, Alabama
IVAN, 2004
From Fugro Chance, Inc.
KATRINA, 2005
CAMILLE, 1969
Head of PassesSou
thwes
t Pas
s South Pass
THE BIRDSFOOT DELTA
Pass A’LoutreNE PassSE Pass
From Fugro Chance, Inc.
2005
2005
2005
18401840
1840
16841684
168418
mi
GROWTH OF THE DELTA
~1300-1400
From Fugro Chance, Inc.
GROWTH OF THE DELTA FRONT
Consider this Profile line across the seafloor
From Fugro Chance, Inc.
1979 BATHYMETRY MAP
From Coleman et al, 1980
Sout
hwes
t Pas
sSouth Pass
Profile lineFrom Fugro Chance, Inc.
1979 BATHYMETRY MAP
From Coleman et al, 1980
Sout
hwes
t Pas
sSouth Pass
Mudflow lobes
From Fugro Chance, Inc.
SEAFLOOR GEOMORPHOLOGY
From Coleman et al, 1980
Region of Mudflow Gullies
Region of Mudflow Lobes
From Fugro Chance, Inc.
Mudflow Gullies or Channels
Mudflow Lobes
6 – 10 miles
From Coleman et al, 1980From Fugro Chance, Inc.
Lessons Learned from the Storm ItselfMud Slides: Freak Occurrence or Expected Peril?
Cause = Threefold
1. Wave activity
Lessons Learned – The Storm
Pressure increase
Pressure Decrease
seafloor
Of course, the wave is moving
So the seafloor pressure is also moving
WAVE-INDUCED PRESSURE ON SEAFLOOR
seafloorDownward Motion
Upward Motion
Lateral Motion
Wave Crest Wave
Trough
SEAFLOOR MOTION
Lessons Learned from the Storm ItselfMud Slides: Freak Occurrence or Expected Peril?
Cause = Threefold
1. Wave activity
2. Deposition on shallow areas
Lessons Learned – The Storm
From Fugro Chance, Inc.
Lessons Learned – The Storm
Lessons Learned from the Storm ItselfMud Slides: Freak Occurrence or Expected Peril?
Cause = Threefold
1. Wave activity
2. Deposition on shallow areas
3. Potential energy / build up
Lessons Learned – The Storm
Mudlobe Advance = 2.7 mi0
200
400
600
800
Dep
th B
elow
Sea
Lev
el, F
eet
0 2 4 6 8 10 12Distance from South Pass, Miles
Pre-Delta
1874
Mudlobe in 18741979
Mudlobe in 1979
From Fugro Chance, Inc.
Lessons Learned from the Storm ItselfMud Slides: Freak Occurrence or Expected Peril?
Cause = Threefold
1. Wave activity
2. Deposition on shallow areas
3. Potential energy / build up
Prevalence
Lessons Learned – The Storm
From Fugro Chance, Inc.
Path
of I
van’
s C
ente
r
Western Limit of Hurricane Force Winds
Mudslide Area
Lessons Learned from the Storm ItselfMud Slides: Freak Occurrence or Expected Peril?
Cause = Threefold
1. Wave activity
2. Deposition on shallow areas
3. Potential energy / build up
Prevalence
Predictability (i.e. 10 - 50 years)
Lessons Learned – The Storm
Effect of Mudslides
Pipelines/Infrastructure/Inter-connecting
Lessons Learned – The Storm
Lessons Learned – The Storm
Lessons Learned – The Storm
Effect of Mudslides
Pipelines/Infrastructure/Inter-connecting
Subsea wells
Lessons Learned – The Storm
Effect of Mudslides
Pipelines/Infrastructure/Inter-connecting
Subsea wells
Platforms
Lessons Learned – The Storm
Lessons Learned – The Storm
2. Water Depth Issues
Repair requirements with water depth:
Lessons Learned – The Storm
2. Water Depth Issues
Repair requirements with water depth:
Shallow (0’ – 300’)
Lessons Learned – The Storm
2. Water Depth Issues
Repair requirements with water depth:
Shallow (0’ – 300’)
Intermediate (300’ – 1,000’)
Lessons Learned – The Storm
2. Water Depth Issues
Repair requirements with water depth:
Shallow (0’ – 300’)
Intermediate (300’ – 1,000’)
Deepwater (1,000’+)
Lessons Learned – The Storm
Lessons Learned – The Storm
2. Water Depth Issues
Repair requirements with water depth:
Shallow (0’ – 300’)
Intermediate (300’ – 1,000’)
Deepwater (1,000’+)
Cost v. Water Depth
Lessons Learned – The Storm
Cost vs. Water Depth
Cost
Water Depth0 500 1000 3000
Lessons Learned – The Storm
Active GOM Leases - 1995
Lessons Learned – The Storm
Active GOM Leases - 2004
Lessons Learned – The Storm
U.S. Gulf of Mexico Deepwater Production
Oil 77%
Gas 26%
Lessons Learned – The Storm
3. Rig Walkabouts
Abandon on location vs. tow to safe water
Is enough being done?
Damage to offshore rigs
Damage to offshore property caused by free-floating rigs
Lessons Learned – The Storm
Semi path – Viosca Knoll Area
•Start
• Finish
Lessons Learned – The Storm
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