Infrassure
A
s traditional sources of fossil fuels run low, the practice of hydraulic fracturing to extract shale gas, or ‘fracking’ as it has become known, presents a potentially big opportunity. However,
the technique used to extract the gas carries significant risks. To mitigate these risks, it requires expertise and planning.
The process begins with the drilling of a vertical bore hole and then
a horizontal well through shale, thousands of metres below the surface. Explosives are then set every three to four metres along the shale layer before a mixture of sand, water and chemicals is pumped in at high pressure. The detonation fractures the shale allowing gas, which is distributed in tiny pockets, to escape and be collected. The water is also recovered and sent to a treatment plant.
The process requires comprehensive risk management, backed up by
quality insurance contracts. This means opportunities for insurers, says David Drinkall, underwriting and claims manager at Swiss specialist insurer Infrassure.
“One aspect is drilling in the same way as would be done when looking for
oil or gas,” he says. “That part is the same whether you are fracking or not. This is not a new challenge for us in terms of covering the risk, as directional drilling has been going on for around 30 years in the North Sea.
“Then there is the use of explosives, the building of pipelines, the
transportation of the gas itself and the disposal of waste water. These bring the risk of possible seepage or leakage. The risks are similar to those present in any oil or gas exploration but all require specialist coverage based on a real dialogue with the client.”
Despite many elements of this process being familiar to insurers, the
risks involved are, nevertheless, extremely complex to underwrite. This means that it is essential for those carrying out fracking to seek coverage from insurers with extensive experience in this field.
“Almost all of our underwriters are engineers with field experience who
have been trained to be insurers,” he says. “We recruit from different fields than a lot of other companies, in that we recruit from within the industries that we are insuring.
“It gives us a certain advantage in tasks such as understanding the risks
and the client’s needs and the necessary technical risk assessment, because our people come with an in-depth understanding from inside the industry. They can therefore tailor the underwriting and claims process more closely.”
The practice of fracking has attracted a certain amount of controversy. There are environmental concerns regarding the
54 | INTELLIGENT INSURER | Spring 2012
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