ONGC sees rise in insurance premium for offshore assets

State-run Oil and Natural Gas Corporation (ONGC) today said it expects insurance premium for offshore assets to rise sharply following an oil leak in the Gulf of Mexico that has been described as the worst in the US history.

"Insurance costs are going to go up exponentially around the world. We anticipate that our insurance premium next year will rise exponentially," ONGC Chairman and Managing Director R S Sharma told reporters on sidelines of a CII conference here.

ONGC had brought down the insurance premium for its offshore assets by around 20 per cent this fiscal in spite of an 8 per cent increase in their valuation.

The company paid $27.05 million premium for 2010-11, down over $7 million from $34.19 million paid in 2009-10. The value of these assets was pegged at $26.50 billion, up from about $25 billion in 2009-10.

"I have been saying that this spill is going to be a game changer," Sharma said.

ONGC insured the offshore assets prior to the spill in the Gulf of Mexico, he said, adding post spill the premium would have been three times higher.

The US ordered halt in deep-water drilling and extended a ban on new permits after the oil spill caused by an April 20 fire aboard the BP Plc-leased Deepwater Horizon rig in the Gulf.

London-based BP, the largest oil and natural-gas producer in federal waters of the Gulf, has spent more than $one billion in unsuccessful attempts to reduce the flow of oil from the leak and clean up the crude.

The spill has polluted at least 140 miles of shoreline.

Sharma said global crude oil prices will continue to be weak due to the eurozone crisis. "Immediate cause of negative sentiment is eurozone crisis and price will continue to be weak in near term. However, in long term, we expect prices to rise."