Munich Re Supports Oil & Gas Decommissioning Product By OneNexus
Munich Re Supports Oil & Gas Decommissioning Product By OneNexus
Munich Re Supports Oil & Gas Decommissioning Product By OneNexus
Reinsurer Munich Re has agreed to provide backstop capital for OneNexus’s new finance product, which aims to provide the oil and gas sector a choice over how to lessen its environmental impact.
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In order to address the decommissioning responsibilities connected with retiring long-lived hydrocarbon-producing assets, such as wells, facilities, and production and gathering systems, OneNexus developed the Asset Retirement Obligation (ARO) solution.
OneNexus claims that if the ARO liabilities kept on energy company balance sheets are not addressed, the number of orphaned wells in the US will continue to rise, placing a financial burden on taxpayers and posing a risk to the environment.
The company plans to use its captive insurer, OneNexus Oklahoma Captive Corp (OOCC), and a partnership with Munich Re Energy Transition Finance (MRETF) to safeguard funds in a regulated ‘lock box’ structure until the capital is needed for the decommissioning of the oil and gas wells.
Munich Re Supports Oil & Gas Decommissioning Product By OneNexus
After this, OneNexus will take title to the plugged wells, to ensure that they do not present further risks in the future.
MRETF’s financial commitment, along with capital provided by OneNexus’ founding members, ensures sufficient capital for OneNexus to cover up to $1.2 billion in ARO liabilities.
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“The transaction with OneNexus demonstrates our unwavering commitment to energy transition,” said Vikram Nath, Managing Director, Munich Re Energy Transition Finance.
“Unplugged or improperly plugged oil and gas wells might lead to harmful emissions, but to date there has been no solution that could address this problem head-on,” Nath added. “We have worked closely with the OneNexus team in structuring this product and are confident that, as this product gains acceptance, it will be a win-win solution for all stakeholders.”
Munich Re Supports Oil & Gas Decommissioning Product By OneNexus
Tony Sanchez, the co-founder of OneNexus, also commented: “As we get down to the business of managing ARO liabilities and plugging wells, we will be helping energy companies become proactive in addressing their decommissioning obligations.
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OneNexus products will ensure that funding for plugging and abandonment activities is available, no matter who owns the wells, far into the future.”
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