Category: General

Functional unbundling is the separation of component parts of a previously unified product or service usually provided by a single party into distinct products or services each provided by different parties. In an unbundled market, consumers in the energy sector no longer have to buy transmission service, marketing and storage from the same supplier. A vertically integrated utility that has to undergo unbundling is often required to choose one component service in which it will specialize and restructure or divest itself of all parts of its business related to services in which it will not participate

What is special about uranium? Some atoms are so unstable that they can split, or fission, thereby releasing energy. Some atoms need only a nudge from a neutron to fission. They are called “fissile”. In nature, there is only one fissile isotope, uranium-235. This makes uranium unique among the chemical elements. Uranium ore is mined and refined into a yellow colored solid uranium compound referred to as “yellow cake”. The yellow cake is converted into various uranium metal alloys or compounds to be used as nuclear fuel What is the composition of natural uranium? Uranium in nature has three isotopes. Only 0.72 percent of uranium isotopes is the fissile isotope, uranium-235. Most uranium, 99.2745 percent, is uranium-238. The rest, 0.0055 percent, is uranium-234. Uranium-238 and uranium-234 are not fissile, but they are still valuable. They are called “fertile,” which are atoms that become fissile when they absorb or capture a neutron. Uranium-234 absorbs a neutron and turns into uranium-235. Uranium-238 absorbs a neutron and eventually turns into plutonium-239, which is fissile but not found in nature. What is enriched uranium? The amount of uranium-235 compared to uranium-238 determines how energetic nuclear fuel is. Natural uranium is not energetic enough to use as fuel in light water reactors; it cannot sustain fission reactions. Instead, such reactors need uranium with a higher fraction of uranium-235 than is found in nature, which is called “enriched”. Light water reactors use fuel that is generally three to five percent uranium-235. When used in current nuclear power plants, one uranium pellet the size of the tip of your little finger is equivalent to the energy provided by 1,780 pounds of coal, 17,000 cubic feet of natural gas, or 149 gallons of oil. One ton of uranium produces the same energy as between 10,000 tons and 16,000 tons of oil. Some of the added advantages of uranium is that it comes from diverse sources with the main suppliers operating in politically stable countries which supplies potentially available for hundreds of years. In addition, the high density of uranium means that transport is less vulnerable to disruption and storage than is the case with fossil fuels.

The EPA is an agency of the Federal government of the US which is responsible for protecting human health and safeguarding the natural environment: air, water and land. It began operations in 1970 and is chiefly responsible for the environmental policy of the United States

The United States Energy Association (USEA) is the U.S. Member Committee of the World Energy Council (WEC). USEA is an association of public and private energy-related organizations, corporations, and government agencies. USEA represents the broad interests of the U.S. energy sector by increasing the understanding of energy issues, both domestically and internationally. In conjunction with the U.S. Agency for International Development and the U.S. Department of Energy, USEA sponsors the US’s Energy Partnership Program.  USEA sponsors policy reports and conferences dealing with global and domestic energy issues as well as sponsors trade and educational exchange visits with other countries. Membership in USEA is open to all organizations having an interest in the energy sector of the United States.

Underwriting energy is regarded a far more hazardous than many other industrial risk. The nature of these risks include high concentration of values, highly flammable substances, harsh operating conditions, often hostile environments, complex business inter-dependencies, harsh weather conditions. Losses from physical damage and the associated business interruption from the major U.S. windstorms have cost many billions of dollars alone in a two year period, the large majority of which have been borne by insurance (and reinsurance) underwriters. Offshore energy underwriters in particular will ask themselves as to whether the premiums they receive for assuming these heavy (and often difficult to evaluate) risks are adequate, taking into account “normal” losses plus “shock” losses. The profitability of insurers in the energy business is best judged over a long period of time, such as 10 years, but there has to be a commensurate balance between risk and reward, otherwise why bother with such high risks? Hurricane Ivan produced unexpectedly high accumulated business interruption losses arising from mudslides that caused damage to the vital sub-sea pipelines. The age and condition of platforms and rigs were key determining factors for the extent of damage suffered in the 2004 hurricane. Similarly, Hurricanes Katrina and Rita serve as costly reminders of how oil and gas businesses can be interrupted by direct damage to owned assets or more significantly by problems stemming from customers or suppliers being affected. A heightened appreciation of the technical characteristics of each risk is necessary. The temptation to focus too much on the latest natural catastrophe and ignore the important operational risks such as fire, explosion and machinery breakdown must be avoided. Quality of management and maintenance standards has a direct bearing on loss experience and allows a differentiation between two seemingly similar risks. Satisfactory details of hurricane preparedness plans that go beyond the priority for protecting health and safety of human life are a key part of the risk assessment. Orderly and timely shutdown of plants, platforms, etc., securing unfixed materials and safe start up procedures are all important points to be examined. Better appreciation of extensions to the basic insurance cover is required. How extensions might increase the indemnity being offered, setting realistic sub limits and how to price the additional cover being granted are essential parts of the underwriter’s thinking, e.g., removal of debris, making wells safe, contingent business interruption. Price spiking as a consequence of a major interference in the supply chain and its spiraling effect on an individual operator’s profits an issue familiar to power generation underwriters, whose policies refer to actual loss sustained and maximum daily values. Improved techniques for monitoring risk accumulation and loss simulation are necessary for good portfolio control and responding to the growing demand for high-level management reporting. Geographical spread within the portfolio serves as a useful balancing tool for underwriters (and perhaps energy companies themselves) when considering natural catastrophe and they may look increasingly towards more benign parts of the globe.