AOC Aon Corp.

Aon Expert Says Some Pipelines Were More Vulnerable Than First Thought CHICAGO, Aug. 30 /PRNewswire-FirstCall/ -- As federal officials contemplate tapping into the nation's oil reserves to blunt oil price hikes caused in part by Hurricane Katrina, oil production companies are doing some contemplating of their own -- surveying the damage to their facilities in the Gulf of Mexico and evaluating how long it will take to get the oil flowing again. (Logo: http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO ) Bruce Jefferis, managing director of Aon's Natural Resources practice group, says that risk managers and their clients still don't know the extent of the damage to Gulf-based facilities, nor the long-term impact on oil and natural gas distribution. "Many of these facilities not only drill for the oil and natural gas, but they produce it from the wells and deliver it into a network of pipeline systems to transport the product back to the mainland," he says. "If their ability to do that is compromised, availability, and consequently the price of the product, will be affected." Oil production companies with platforms and rigs in the Gulf buy insurance based upon the worst-case scenario, Jefferis says, so most have sufficient insurance coverage. "They anticipated the possibility of a big loss," he said. Yesterday, the federal Minerals Management Service said that 92 percent of the region's oil output and 83 percent of natural gas output was shut down, resulting in more than 3 million barrels of oil production and 15.5 billion cubic feet of natural gas lost since Friday. Jefferis says the oil and gas companies learned some lessons from Hurricane Ivan. That storm caused serious damage to the nation's oil infrastructure in the Gulf, Jefferis says, and he suspects that some of the repairs are still ongoing from last year. One issue that arose after last year's storm was how dependent some oil companies were on pipeline systems owned by others. "There was probably an under-appreciation of the degree of dependency many of these companies had on people downstream in the chain," Jefferis says. "If the pipeline you depend on to transport your product is owned by another company, you're dependent upon that company to maintain it, and after storms like Ivan and Katrina, repair it." If a pipeline sustains damage, Jefferis says, oil production remains suspended until repairs are made. "There's no use producing the oil and gas if you can't ship it," he says. Some oil companies also learned after Ivan that pipelines imbedded in the sea floor are not entirely protected from damage caused by turbulent seas. "Damage from storms like these occurs both above and below the water," Jefferis says. "Hurricane Ivan increased awareness among oil and gas operators of the potential vulnerability of 'sub-sea' equipment and the impact that vulnerability can have on oil and gas production." Hurricane Ivan reportedly resulted in the loss of nearly 44 million barrels of oil production between September 2004 and February 2005. The Gulf of Mexico normally produces 2 million barrels of crude oil a day, or about 35 percent of the United States' domestic output, according to government and industry data. Aon Corporation (NYSE:AOC) ( http://www.aon.com/ ) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 47,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions. This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of investigations brought by state attorneys general, state insurance regulators, federal prosecutors, and federal regulators, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, and ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results, is contained in the Company's filings with the Securities and Exchange Commission. For more information, contact: Al Orendorff, Aon Corporation, +1.312.381.3153, or . http://www.newscom.com/cgi-bin/prnh/20041215/CGW049LOGO http://photoarchive.ap.org/ DATASOURCE: Aon Corporation CONTACT: Al Orendorff of Aon Corporation, +1-312-381-3153, Web site: http://www.aon.com/

Copyright