Friday, 30 June 2017

Oil and Gas Risk Management Market Key Product Segments and Future Forecast by 2020



No industry is devoid of risk and the Oil and Gas industry is not an exception either. Companies invested in the business of oil and gas face their own unique set of risks, be it natural, manmade or inherent in their daily operations. Risk management solutions for the oil and gas business vary in general with the environment of business, the stakeholders and the nature of operations. Efficient risk management solutions not only need to be tailor made according to the industry but also to the specific business environment being faced. Project risk management is an integral part of any project in the oil and gas business. Companies providing risk management services need not only identify major risks in the business but also communicate risk management solutions in an effective manner. Risks when not managed diligently can have dire consequences on any Oil and Gas Company’s balance sheet.

The oil and gas business is capital intensive in nature and operates with a large asset base and in highly risky environments. This drives the need for such companies to effectively manage their catastrophic risk portfolio. These market players need to continuously strive to optimize and strengthen their risk management models. General risk management models comprise of two primary phases namely the initial risk management and residual risk management. As the name suggests initial risk management is carried out initially to identify all risks associated comprehensively. Risks remaining after identifying initial risks are the residual risks. The residual risks are generally those having the potential to cause very high economic loss to the company and must be handled with extreme care and diligence. The types of risk management can be segmented as initial risks and residual risks.


Market players in the oil and gas business also face multiple exposures to risk. These risk exposures generally include exposures to business interruption, exposures to damage of assets, exposures to damages caused by third parties, exposure to people harm and finally exposures to environmental pollution. Management of all these exposures benefits the firm in many ways through adoption of the prevention before cure philosophy. Robust risk management not only increases the level of control oil and gas companies exercise over their business environment but also increases flexibility. An effective risk allocation between parties reduces risk perception of investors and results in cheaper financing of projects as well. Some of the risk management services include Hazard Identification and Evaluation, Pipeline Risk Analysis, Security Threat Management, Facility Site Evaluation, Blast Resistant Design & Construction Management, Quantitative Risk Analysis and Catastrophe Evacuation Modeling among others. Risk management can be applied for both onshore and offshore oil and gas facilities.


The global market for oil and gas risk management is poised for growth in the future. This is driven by the increased sensitivity of investors towards risk management and the dire consequence to the environment in the event of major risks being realized. Catastrophes like oil spills among others not only harm the environment but also cost the oil and gas companies billions of dollars in punitive damages. The major focus of these oil and gas giants is to effectively allocate risks to parties involved and minimize chances of occurrence which require strong risk management procedures. The regional market segmentation for these risk management services can be done as North America, Asia-Pacific, Middle East and Africa and Europe. Areas where exploration activities are the most concentrated are likely to require such services the most. Some of the major players dealing in such services include ABS Consulting, Tullow Oil Plc., Intertek Group Plc. and DNV GL AS. among others.

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