Mexico oil spill will raise premium payouts, says ONGC chief

The oil spill off the Gulf of Mexico, for which BP Plc has borne the brunt of the blame, will spike insurance costs for all upstream oil companies, including India's Oil and Natural Gas Corp, its chairman and managing director R S Sharma says.

The worst oil spill in US history ''is going to be a game changer'', Sharma told reporters in New Delhi on the sidelines of a CII conference. ''Insurance costs are going to go up around the world. We anticipate that our insurance premium next year will rise exponentially.''

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

State-owned ONGC paid $27.05 million premium for 2010-11, down by 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.

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 a 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.