Following on from our previous article about the massive business opportunities Oil and Gas In Indonesia, now it’s our turn to discuss how new companies can start their businesses safely and securely.
For companies new to the industry, various operational risks, such as workplace accidents, asset damage, project disruptions, and legal and environmental liability, pose real challenges. Facing these challenges, securing a starter pack of insurance from the outset is not merely an option but a strategic step to ensure business continuity and protection.
With the right initial insurance package, companies can focus on project development, maintain operational sustainability, and minimize potential financial losses that could destabilize the company. In this article, we’ll discuss the latest oil and gas prospecting trends, potential risks, essential starter insurance packages, and practical tips for selecting a policy and managing risk professionally.
Oil & Gas Trends and Prospects in Indonesia
Indonesia’s oil and gas industry continues to show positive trends, driven by rising domestic and export energy demand. Upstream projects, such as oil and gas exploration and production, are increasingly intensified, while downstream projects, including refinery development and distribution infrastructure, open up huge opportunities for new companies looking to enter this market.
Furthermore, the government continues to encourage investment in the energy sector, including renewable energy, to support the national energy transition. For new companies, this trend means numerous business opportunities, ranging from EPC (Engineering, Procurement, and Construction) contracts and subcontracting to oil and gas logistics and transportation services.
However, these promising prospects also come with complex operational risks. From workplace accidents and heavy equipment failures to potential environmental impacts, every project presents its own unique challenges. Therefore, understanding these risks and implementing appropriate safeguards from the outset is crucial.
This is where starter pack insurance plays a strategic role. With the right protection, new companies can focus on capitalizing on business opportunities without constantly worrying about potential financial or legal risks.
Understanding these trends and opportunities also helps companies tailor operational strategies and determine the insurance packages that best suit the needs and risk profile of each project.
Key Risks Facing New Oil & Gas Companies
Entering the oil and gas industry offers significant opportunities, but new companies must be prepared to face various risks that could disrupt operations and financial stability. Here are some key risks to consider:
a. Work Accidents and Officer Safety
The oil and gas industry is inherently risky due to the use of heavy equipment, remote work, and exposure to hazardous materials. Incidents such as oil spills, explosions, or injuries during drilling operations can result in significant claims and damage a company’s reputation.
b. Asset and Equipment Damage
Oil and gas equipment and facilities are worth billions of rupiah. Damage from accidents, operational errors, or natural disasters can disrupt projects and result in exorbitant repair costs. Without protection, companies must bear these risks themselves.
c. Operational Disruption
Force majeure events such as storms, earthquakes, or fires can cause temporary project interruptions or material losses. These disruptions can also impact client contracts and reduce revenue.
d. Legal and Environmental Responsibility
Every oil and gas project carries legal liabilities, ranging from environmental pollution to third-party accidents. Without insurance coverage, companies risk complex and costly lawsuits.
e. Financial and Reputational Risks
The combination of operational and legal risks can have a significant impact on a company’s financial health and reputation. For a new company, a single significant incident can destabilize business continuity, erode investor confidence, and complicate the development of future projects.
Recognizing these risks early on allows companies to develop effective mitigation strategies, including internal procedures, safety training, and insurance coverage. With the right insurance starter pack, new companies can manage these risks more safely, allowing them to focus on business development without worrying about unexpected losses.
Must-Have Starter Pack Insurance
For new companies entering the oil and gas industry, having insurance Starting a policy is a strategic step to safeguard assets, employees, and project continuity. The oil and gas industry is fraught with risks—from workplace accidents and equipment failures to legal liability—that can threaten a company’s stability if not managed properly. Here are the types of insurance you should have:
a. Surety Bond & Bank Guarantee
Apart from conventional insurance, Oil & Gas companies also often need a surety bond or Bank guarantee to support projects, particularly those of a contractual nature. This product provides assurance to the project provider that the company will fulfill its contractual obligations as agreed.
Main functions:
- Ensure project implementation according to contract.
- Provides a sense of security for clients or project providers regarding payment, quality, and timeline.
- Reducing the risk of default or breach of contract by the contractor.
Types of bank guarantees we recommend:
- Bid Bond– guarantee that the company is serious about participating in tenders or auctions.
- Performance Bond– guarantee that the company completes the project according to the contract.
- Advance Payment Bond– guarantee of refund of down payment if the project does not meet the agreement.
- Maintenance Bond– guarantee that the company will repair or maintain the facilities for a certain period after the project is completed.
By adding Surety Bond & Bank Guarantee By incorporating insurance into the starter pack, companies not only protect assets and employees but also ensure trust and contractual compliance with clients and business partners. This is a crucial part of risk mitigation strategies and project management in the oil and gas sector.
b. Construction All Risks (CAR) Insurance
For companies that handle oil and gas facility construction projects, CAR Insurance covers risks during construction, from damage to materials and on-site equipment to third-party liability. This policy is tailored to the project scale and contract value, minimizing financial risk from unforeseen incidents.
c. Liability Insurance
Oil & Gas companies frequently interact with third parties, including local communities, clients, and other contractors. Liability Insurance is very important because it provides protection against third party claims due to property damage, injury, or accidents during operations.
The types of police we recommend and commonly use include:
- CGL (Commercial General Liability)– protect the company from claims of loss or injury to third parties in general.
- Public Liability– focus on claims from the community or external parties affected by operations.
- Environmental Liability– protect companies from lawsuits related to environmental pollution or ecosystem damage due to operational activities.
Understanding and selecting the right policy type is crucial to ensuring financial protection and maintaining a company’s reputation. We recommend that each company tailor its liability policy to its risk profile to optimize protection and minimize potential losses that could disrupt operations.
d. Property Insurance
Protects a company’s fixed assets, such as offices, production facilities, warehouses, and project infrastructure. Damage from fire, natural disasters, or operational accidents can result in significant repair costs.Property Insurance can be adjusted to suit your needs, for example using a scheme PAR (Property All Risks), MB (Machinery Breakdown), or BI (Business Interruption) By choosing the right policy, companies can ensure assets remain protected, financial risks are reduced, and projects continue to run smoothly.
pollution or ecosystem damage due to operational activities.
Understanding and selecting the right policy type is crucial to ensuring financial protection and maintaining a company’s reputation. We recommend that each company tailor its liability policy to its risk profile to optimize protection and minimize potential losses that could disrupt operations.
e. Heavy Equipment Insurance
Protecting heavy equipment (heavy equipment) such as rigs, cranes, excavators, and drilling machines. The risk of damage or loss of heavy equipment can be very expensive and disrupt the progress of a project. For heavy equipment, there are special types of policies such asCPM (Contractor’s Plant & Machinery), which provides protection against damage, loss, or financial loss due to accidents, human error, or natural disasters. CPM policies can be tailored to the type of equipment, project location, and insured value, allowing companies to cover the costs of repairing or replacing heavy equipment without disrupting operations.
f. Marine & Cargo Insurance
The transportation of fuel, equipment, and oil and gas products often involves both sea and land travel. The risk of loss, damage, or delay in shipment is very real. Marine & Cargo Insurance ensuring goods remain protected during transportation. This policy is essential for new companies looking to maintain efficient logistics flows without worrying about potential losses due to transportation incidents.
g. Workers’ Compensation / Personal Accident Insurance
Employee safety is a top priority. The oil and gas industry carries a high risk of workplace accidents due to the use of heavy equipment, exposure to hazardous materials, and operations in remote locations.Workers’ Compensation or Personal Accident Insurance protects employees in the event of work-related injury or death. This protection also helps companies meet legal obligations and increases team loyalty and trust, which are essential for operational sustainability.
h. Professional Indemnity (PI) or EPC Insurance
For companies involved in EPC (Engineering, Procurement, Construction) projects or providing engineering consulting services, the risk of professional error or negligence can lead to lawsuits and financial losses. Professional Indemnity (PI) Insurance provides protection against claims resulting from contractual breaches, miscalculations, or professional negligence. With this policy, companies can focus on project development without worrying about legal claims that could burden their business.
The Role of a Professional Insurance Broker
In building insurance starter packs for Oil & Gas companies, the role of a professional insurance broker is crucial. Selecting the right policy and tailoring it to your operational risk profile is no easy task, especially for start-ups looking to ensure all aspects of their project are covered.
The main functions of an insurance broker:
- Determine the right type of police– Brokers help assess risks and recommend the most suitable policy combination, ranging from Property, Heavy Equipment, Liability, Marine & Cargo, to Construction All Risks and Surety Bond.
- Determining the insurance value– Brokers adjust coverage limits to asset value, project risk, and industry standards to prevent companies from being over-insured or under-insured.
- Simplifying the claims process– When an incident occurs, the broker helps process claims so that the company gets paid quickly and according to the policy.
- Providing long-term strategic advice– Brokers not only sell policies, but also provide insights regarding risk mitigation, regulatory compliance, and industry trends that affect insurance needs.
With the guidance of a professional broker, new companies can build insurance starter packs comprehensively, reducing financial risk and ensuring smooth and uninterrupted project progress. The broker’s role also ensures the company remains focused on business development and operations while managing potential risks.
Conclusion
Entering the Oil & Gas industry brings many opportunities, but also comes with high risks that can threaten.
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DON’T WASTE YOUR TIME AND SECURE YOUR MINING FINANCIAL AND BUSINESS WITH THE RIGHT INSURANCE.
L&G 24-HOUR HOTLINE: 0811-8507-773 (CALL – WHATSAPP – SMS)
INWebsite: lngrisk.co.id
Email: halo@lngrisk.co.id
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