ME - the lynchpin of economic growth

The Middle East will play a vital role in sustaining global economic growth, according to speakers at the Middle East Energy Insurance Conference.

Placing a particular emphasis on the oil and gas sector, event host, Aon, said the conference took place against a backdrop of increased political risk, mounting environmental pressures, and renewed emphasis on supply chain management.

"There has always been a need for risk management, but this has been increasing over the last 25 years," said Magne Seljeflot, Aon's chairman of global natural resources practice. "Large companies realise that risk factors are critical to their success."

A series of seminars, held over two days, addressed how the Middle East, with half of the world's proven oil reserves and almost a third of natural gas supplies - is a major beneficiary of rising global demand. The economy in the region is expected to grow by 5.5% this year compared with a global average of 4.9%, said Aon, with strong growth expected in the future.

"Risk management will become more sophisticated as it becomes increasingly integrated with the financial and strategic planning of individual companies," added Seljeflot. "Multi-million dollar projects invariably require external finance, which need a much stricter focus on risk management.

"The supply chain is greater than ever, so if something goes wrong now, the consequences are far more severe than they would have been twenty years ago. Most of the easily accessible oil supplies have already been found so drillers are operating in deeper water and more hostile areas. The overall safety of the delivery system is now more important than ever. Companies investing large amounts refuse to invest unless there is some kind of collateral in place," he said.

Demand for oil and natural gas is expected to grow 42% and 67% respectively by 2030, according to recent forecasts from the International Energy Agency. Seljeflot told the committee that as energy demand soars, the ability to explore, develop and bring energy to market can be a massive undertaking.

"Contractors and fabricators' order books are now completely full, so if something goes wrong, schedules can be put out by over a year," he said. "Also, the logistics of pipelines, such as those running from Russia to Europe, are becoming increasingly complex.

"This has made the supply very vulnerable. There are a small number of very important trunklines, and if any of these stop supplying, there will be an acute shortage of delivery," he added.

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