Gulf of Mexico spill may boost insurance rates

HOUSTON (Reuters) - Huge claims resulting from the massive Gulf of Mexico oil spill are likely to drive insurance premiums higher, possibly making it too costly for smaller oil and gas companies to drill in deep water, a Devon Energy Corp (DVN.N) executive said on Thursday.

"The experience is that insurance goes up in areas where there have been large claims," Devon President John Richels said at the Reuters Global Energy Summit, noting that rates always rise after big hurricanes.

Most of the largest oil companies are self-insured, while the small and large independent oil and gas companies carry insurance, Richels said.

The BP operated Macondo well in the Gulf of Mexico ruptured on April 20. Since then, the well has gushed up to 19,000 barrels per day and caused the U.S. government on Thursday to extend a ban on new deepwater drilling for six months .

Many in the industry expect the accident to result in higher costs and stricter regulations.

Devon, the second largest U.S. independent oil and gas company by market value, said in November that it was exiting the offshore business to focus exploration onshore in North America. The company has signed deals for most of the assets it has put up for sale.

For example in March, BP Plc (BP.L) (BP.N) agreed to pay $7 billion for Devon fields in the Gulf of Mexico, Brazil and Azerbaijan.

The Oklahoma City, Oklahoma company also said it planned to sell its shallow-water Gulf of Mexico fields to Apache Corp (APA.N) for $1 billion.

All of the offshore deals are expected to be finalized, Richels said.

"There's no indication that any of these (planned sales) will not happen," the executive said.

Devon, which plans to operate about 60 drilling rigs this year, expected natural gas prices to remain depressed this year as supplies weigh, Richels said.

Natural gas prices are expected to range from $4 to $4.50 per thousand cubic feet in 2010, with some improvement seen in 2011, Richels said.

(Reporting by Anna Driver in Houston, editing by Bernard Orr)