‘Be patient’, is the advice coming from a Texas energy insurer for brokers who are new in the oil and gas market or who are looking at entering the black gold coverage area for the first time.
“There will be days when it (oil) looks like it’s recovering faster than it is and there will be days where it looks like it’s recovering slower than it is,” Thomas Blanquez, business development manager and energy broker for Quirk & Company said.
“But a long-term perspective is what you’re going to need to have if you’re a broker, because we still have a way to go before we get back to where we were, if we ever get back to $100 barrels.”
US President Trump put his seal of approval on the Keystone XL and Dakota Access pipelines in a major news conference on Tuesday.
Blanquez said he believes “pipelines can’t be built fast enough to keep up with demand” and “as more projects are greenlighted, and there will be a demand…for the use of insurance locally.”
The day after Trump’s approval, the need for pipeline insurance was highlighted when approximately 138,000 gallons of diesel fuel leaked out of a pipeline in Iowa.
Several days earlier, in Saskatchewan, 200,000 litres of oil
leaked out of a pipeline in the Canadian province.
Blanquez insists pipelines are considerably safer than shipping oil using trains or trucks and said less dramatic breaks in the infrastructure are more likely than what makes the news.
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“The most common claims are a pipeline rupture, or a pipeline that has been buried for years and has been corroding, it’s leaking…seepage and migration from a poor pipe or just age,” Blanquez said.
“It is an exhausting process because the EPA is going to get involved and tell you to what extent and how far you have to go to remediate the issue. You have to excavate or unearth the pipe, you have to replace the skin of it, scrape the dirt.”
Sometimes the excavations go as deep as 20 or 30 feet, Blanquez said, before restoring it. Plus there’s a period of runoff where the EPA requires soils sampling, water sampling and checking in on reservoirs.
On the overall market side, oil prices have been low for some time, though Blanquez is “cautiously optimistic” about a rebound.
“As far as the demand for insurance, it (the price) has been problematic because we’ve seen more cancellations for non-payments of premiums, we’ve had to do rewrites of the accounts that have cancelled,” Blanquez said.
“They’ve had to shut their doors and not open up until they actually get work, so there could be lapses in coverage before they actually get a job.”
Regulatory changes have Blanquez believing hope for the future is well justified.
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