Nigerian insurers bleed on Egina FPSO loss claims

Claims expense by insurers on the Egina FPSO Oil Field has been described as the largest ever recorded in the Nigerian insurance industry.

Broken into tranches according to loss valuation, the industry has paid out an initial $40 million (equal to N14.4 billion) as interim claims, while the final figure was still being expected.

The facility, insured by Leadway Assurance Company Limited as lead insurer and over 10 other co-insurers, was said to have suffered damage in 2018 following a break and falloff of some part of the deepwater platform.

The size of the claim underscores the capacity of the Nigerian insurance industry to meet claims obligations, and the need for operating companies to have adequate reinsurance treaty to meet claims obligation when they crystallise, analysts said.

“The claim is very big but with adequate reinsurance we will be able to pay our portion,” said a chief executive officer in the industry who did not want to be mentioned.
According to him, premium on Egina was paid five years in advance and the loss happened three months to the end of the tenure.

He noted that with the support of reinsurers, a lot of the companies were able to pay their initial share and got refunds from their reinsurers, whereas those who were greedy to take premiums higher than their capital adequacy will suffer heavily.

The CEO said an initial interim payment was to commence repairs before the final claims adjustment will come.

Located some 130km off the coast of Nigeria at deepwaters, the Egina oil field is one of Nigeria’s most ambitious ultra-deep offshore projects.

Primarily developed locally to accelerate the pace of Nigeria’s industrial fabric and the transfer of technology, the project is expected to produce 200,000 barrels of oil per day, i.e., close to 10 percent of the country’s total oil production.

Discovered in 2003, the Egina field is located at water depths of between 1,400 and 1,700 metres, 200km offshore from Port Harcourt. It is operated by Total, which has a 24 percent stake, in partnership with NNPC, CNOOC, Sapetro and Petrobras.

The project is based on a subsea production system connected to a FPSO (floating production, storage and offloading vessel) designed to hold 2.3 million barrels of oil.
The FPSO is connected to 44 subsea wells 1,600 metres deep and will produce 200,000 barrels of oil per day.

Weighing close to 220,000 metric tonnes and measuring 330 metres long by 60 metres wide, the Egina FPSO is one of the largest ever operated by Total, Jean-Michel Guy, executive general manager of the Egina project, said.

“The water depth posed a challenge for the development of Egina,” Guy said.

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