Perils encountered by oil and gas facilities can be classified generally under two headings, in terms of existence:

Onshore and offshore risks.

And in terms of types, they can be classified into

1/ Perils of physical damage such as

(a) Fire: Fire is considered as the most expected perils because of the flammable materials and oil and gas blast.

(b) Chemical perils such as explosion and boiling

(c) Natural perils such as, hurricanes, floods, earthquake, volcanoes, lighting and rain.

(E) Social and political perils such as demonstrations, turmoil, riots, and malicious accidents.

(f) Other perils for example: air crash, objects falling.

2/ Corrosion:

This peril could be a real obstacle for the continuation of operation. Sometimes it causes halt of production for a long period and that in turn can cause considerable material losses. Corrosion is defined as " the degradation of materials by chemical reaction with the environment in which the material resides  " this because of the metal oxidation

3/ Pollution:

the presence of hydrocarbon, sulphur dioxide and nitrogen in the form of gas or liquid some of which go in the air and other leak into the water causing pollution. This peril can be categorized under public liability.

4/ Perils of public liability.

5/ Perils of the Dependent risks.

It should be taken into account that an installation can be exposed to such risks at any phase of oil exploration and it could even be exposed to all these risks.

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  1. Filling the insurance proposal form
  2. Allow Inspection by an actuary.
  3. Specifying the maximum probable risks. It is defined as the most probable loss that may occur in the case of fire or explosion.( with consideration  to all surrounding circumstances that render to mitigating or increasing loss).

Factors of pricing and subscription

  1. Topographic features of the area
  2. Required coverage
  3. Amounts of insurance.
  4. Period of insurance.
  5. Co-payment
  6. Maximum probable loss.
  7. Type of premises.
  8. Number of wells and its depth. ( wells insurance price is calculated according to the depth of well per foot)
  9. Fire extinguisher systems
  10. Premises surrounding the area.


1-Totally excluded risks (absolute exclusions) which cannot be covered even by additional premium, such as:.

  • Radiation.
  • Nuclear perils.
  • Gradual tear and wear (resulting without involving any external factor).

2-Excluded perils however it could be covered by additional premium (perils are excluded according to standard policy) .Perils of this type includes: subsidence landslip, sabotage and terrorism.

3-Excluded perils, because they have specialized policies such as: machine and vehicle breakdown, marine insurance and so on.   

4-Commercial losses.

It is to be noted that, there are some coverage offered by the policy without imposing additional premium like:

  • Removal of wreck and debris-
  • Fire-fighting expenses.
  • Clean up expenses.
  • Underground blow out.