EQECAT Model Warns of Potential $65 Billion in Gulf Energy Losses

September 6, 2007

A risk modeling projection from Oakland, Calif.-based EQECAT, Inc. forecasts that the passage of a strong hurricane “like Camille, a category 5 storm, with a track through the heart of Gulf of Mexico U.S. offshore energy platforms, could generate energy producer damage and loss of more than $65 billion.”

EQECAT CEO Richard Clinton indicated that “property damage alone could exceed $35 billion and losses due to business interruption and reduction in production capacity could add another $30 billion to the loss.'”

Clinton also observed that “industry insured losses are more difficult to estimate due to the changes in allocated insurance capacity, policy terms and limits following the large losses from 2004-2005 hurricanes, but could certainly be in the $15 billion range.”

As a result he warned that the energy industry in the Gulf of Mexico faces “substantial risks,” which could also adversely effect the entire U.S. economy.

EQECAT calculated the estimates from its new “Offshore Energy model, which was designed specifically for quantifying offshore energy risk.” Dr. Mahmoud Khater, EQECAT’s chief technical officer described the model as incorporating new “capabilities that enable more comprehensive loss estimates for the offshore assets than those previously available. The model takes into account waves and current, wind, tidal surge and mudslides to estimate platform and pipeline damage.”

Engineers from ABS Consulting, EQECAT’s parent company, assessed the “vulnerabilities of the different assets,” incorporating “decades of experience in the risk assessment of offshore platforms worldwide.” Dr. Khater indicated that the “damage functions were validated using extensive damage and claims data from hurricanes Ivan, Katrina and Rita.”

EQECAT stressed that perhaps the most “innovative aspect” of the model is its “ability to quantify the risk of disruption of product delivery to onshore facilities due to pipeline damage. This assessment is possible through use of a network analysis that considers pipeline connectivity, redundancy and the impact of wave scouring and mudslides to determine residual pipeline capacity after a storm. The program estimates the initial loss of oil and gas product delivery capacity, and also takes into account the time necessary to restore full delivery capability.” Dr. Khater described it as the “first model that will enable users to plan for all major aspects of offshore damage and loss.”

The Offshore Energy model is available for immediate use. For additional information about EQECAT risk models, go to: www.eqecat.com, or call +1-510 -817-3100.

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