Oil and Gas Insurance

Lessons for East Africa

21 Apr 2023

East Africa Market Outlook

Trends in Oil and Gas in East Africa

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Recent discoveries in oil and gas across the East African region have brought new focus on upstream activities

9 oil discoveries with 2C 616M and 3C 1.29B barrels. 3 gas discoveries with one estimated to have about 1.8 Tcf of natural gas and the other about 25m net pay.

Over 53 Tcf of Natural Gas discovered. Gas monetization projects in top gear.

Exploration at its early stage. Western arm of the East African Rift System.

Exploration ongoing. Methane gas production in Lake Kivu. Policies being developed.

Discovery of oil in Uganda in 2006. Resources in place: 6.5B barrels. Recoverable reserves: over 1.4 billion barrels. Bid round ongoing.

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The opportunities for local insurance companies in oil and gas sector cut across the segments

Upstream Midstream Downstream

On-shore Wells

Off-shore Wells

Field Processing, Gathering Systems

Central Processing,

Storage

LPG

Pipeline Transport

LNG Transport

Distribution &End-Use

ResidentialConsumers

Commercial Consumers

Industrial Consumers

Electric UtilityConsumers

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These opportunities also traverse the related goods and services supply chain

Fuel

Emergency Services

Waste Management

Security

Medical

Crane Hire

PersonnelTransport

Freight Forwarding

CustomClearance

FacilitiesManagement

IT Services

Telecoms

Hotel/Accom.

OfficeSupplies

HR

UnskilledLabour

Training General Trades

Catering

Communications

Camps/Accom.

FPSO/Wellhead

Tangibles

RigHire

Feed

SeismicServices

WellServices

Environmental Services

Int. Freight Services

Site Prep.

Field Construction

Specialist Trades

InspectionsInfieldTransport

SpareParts

InfieldServices

Civil

Mechanical

Electricals

Mud/Cuttings

ConstructionMaterials

INDIRECT SERVICES• Mostly available and well serviced

in EA• Not very specialized but requires

some expertise• Need to improve standards• Some investment required ($)

DIRECT SERVICES•More specialized •Stringent compliance to safety and operational standards•Requires significant investment ($$)•Not widely available in EA

SPECIALIST SERVICES•Highly specialized•Strictest standards for operations and safety•Critical services (mistakes ground operations and increase losses exponential)•Heavy investment in service provision + R&D ($$$)•Not available in EA

Closer Look

Lessons from Nigeria

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Nigeria: timeline of selected Oil & Gas sector developments

1956First commercial discovery

1958First oil (~ 5,000 bopd)

1971Joined OPEC

1972ranked 7th largest producer globally

1977Established NNPC

2010Nigerian content law passed

19992nd attempt with 60 companies – not launched

19951st petroleum pool plans begin + collapse

2003Insurance Act passed

2011NAICOM publishes guidelines

2012NOGIP with USD 20M capacity launched

2007NAICOM raises capital requirements

2015Pool with Africa Re as manager launched

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Some basic statistics on how the local insurance sector has been developing

Retention Rates

NNPCNo. of Companies

Top 10 companies cover 75%

© 2015 KPMG Kenya, a registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 9

Challenges exist in the prospects of underwriting insurance for oil and gas locally

© 2015 KPMG Kenya, a registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. 10

Lessons for East Africa

© 2015 KPMG Kenya, a registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

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