It has been a significant week in the energy industry and one that will have interested the insurance sector.
The move towards a renewable future has continued to gather pace despite the warning from the International Energy Agency that global CO2 emissions are now above the level they were pre-COVID. This has been accompanied by new university research that warned the world needs to increase its reductions of GHG emissions ten fold if it is to get anywhere near the targets set out in the Paris Agreement.
On Wednesday Felipe Arbelaez, a Senior Vice President at BP that offshore wind is at an “inflection point” for growth as costs for the renewable power source fall and technologies advance.
Mr Arbelaez is BP’s executive with responsibility zero carbon energy and said the belief was that the growth in the construction and use of offshore wind development will continue to increase by double digits throughout this decade. The major driver to growth is the reduction the costs of the systems and the technology.
While offshore wind energy is getting cheaper ministers of the world’s leading oil producers were meeting to look at how they would react to the cost of oil having risen.
With oil now above $60 a barrel, some analysts have predicted the OPEC+ group of producers will increase production by about 500,000 barrels per day (bpd) and also expect Saudi Arabia to partially or fully end its voluntary reduction of 1 million bpd.
However, there are members of the Organization of the Petroleum Exporting Countries who believe OPEC and its allies should keep output unchanged, believing that the recent increase in demand is at best fragile and is far from certain in the medium term.
It provides a market of contradictions for the insurers and EU Regulators are not helping.
The European Parliament is pushing through measures which focus on the liability regime for offshore safety incidents.
The International Union of Marine Insurance (IUMI) has voiced its concerns over the potential changes to the 2013 EU Offshore Safety Directive.
Currently the directive applies through national legislation by Member States for offshore oil and gas installations.
An assessment of the implementation of the Directive was presented in a report to the European Parliament in November 2020.
In terms of the future liability and the handling of compensation claims, the EC intends to follow-up with further analysis and/or research. The intention will be to assess whether a uniform regime on, for example, the principle of strict liability of installation operators and owners that go beyond the minimum requirements of the Directive would benefit the safety of offshore operations and the follow-up of accidents.
IUMI said it favours a voluntary financial security system rather than a legislative compensation system over and above existing provisions. Any further investigations into the potential role of insurance in the assessment will require a cost-benefit analysis cross-referred with insurance market capabilities and limitations, it added.
It adds a new dynamic for the energy market as it looks to support the world’s fight against climate change at a time when the move to more sustainable power, while gathering momentum, is still going far slower than many would like.
For the industry the shift from traditional fossil based fuels to a renewable future and the new risks that comes with it will test the mettle of many.