Offshore Oil & Gas and Energy Insurance
Offshore Oil & Gas and Energy Insurance covers offshore developments, contracts, typical situations, carriage of products by sea, shuttle tank, bow loaders, tanker voyage charters and shortage claims.
Offshore Developments
Whether within a package policy or separately, we also have particular experience in relation to:
- Liability Insurance
- Property Insurance
- Control of Well Insurance
- Coverage Disputes
Contracts
Onshore and Offshore Construction Contracts drafting reviewing and updating the full suite of operators' standard contract terms.
- Front end engineering and design
- Services (feed)
- Supply/procurement (purchase order)
- Engineering/construction, installation and commissioning (epic)
We have particular experience of the following contracts:
- Seismic surveys & drilling contracts
- Pipeline construction, trenching & laying
- Anchor handling, supply & standby vessels
Typical Situations
The typical situations we are looking at are contracts for the design / construction / installation of a component, to be delivered onshore where following installation the component is found to be damaged, where damage results from:
- Error in design
- Faulty workmanship
- Unsound materials
Defects discovered outside the warranty period can usually be based upon the contractor's failure to comply with the above undertakings.
The guarantee provision provides a guarantee against certain defects. Offshore recovery costs provision normally appears within the guarantee clause and is expressed as being applicable to all defects discovered in the guarantee period.
This provision specifies that the oil company will bear the full costs of retrieving the defective component from the offshore installation and returning it to the onshore point of delivery for the purpose of the contractor "making good". Likewise the cost of returning the repaired component offshore and reinstallation is to be borne by the company.
The consequential loss provision was intended to exclude recovery of those losses that fall within the second limb of Hadley v Baxendale, however over the years this has become bastardised.
Our experience with the contracts
As lawyers we have been involved in the offshore oil and gas industry for over 25 years. Much of the standard wording now in use originated from pen. We have developed (together with oil companies) a series of tried and tested wordings, which we continually update. Our philosophy accords with the tenets of ISO 9000 in that the negligent party pays for their own negligence.
Contract Interpretation
All contracts contain general provisions describing the quality of the work to be performed. In law these will be considered to amount to general warranties. These general warranties can be useful as they are generally unlimited both in extent and duration. For instance the contractor will ensure that the work shall meet the specifications and the company's requirements/in every respect be fit for the purpose/all materials shall be sound and of good quality/contractor warrants it's an expert, that the work shall be of good quality completed diligently and expeditiously/company places full reliance on contractor/contractor has a full understanding and knowledge of the design criteria.
The guarantee is limited in extent to the cost of "making good" and limited in duration to 12 or 24 months. The effectiveness of this provision will depend upon whether the guarantee differentiates between pre and post (on-shore) delivery and how defects are defined (which affects the survivability of the general warranties).
The financial cap on liability. This is the contractor's catch-all safety net, usually expressed in terms that notwithstanding any other provision in the contract the contractor's liability in aggregate under this contract shall not exceed [so many multiples of the] total contract price.
The consequential loss exclusion acts as a mutual undertaking that neither party shall be liable to the other for any consequential losses. These vary enormously from the strict - where they exclude all remedies other than the cost of "making good", to the more restricted - where they exclude big-ticket losses such as loss of production, business, business opportunity, trading revenue and loss of profit.
Carriage of Products by Sea
- Shuttle Tanker/Bow Loaders
- Drafting and advising on special provisions
- Post fixture disputes
- Standard form agreements
- Condition on delivery/maintenance clause
- Responsibility for stowage
- Charterer's bunkers
- Off-hire provisions
- Safe ports, berths and anchorage
- Trading limits/war risks
- Duration of hire/redelivery
- Payment (or non-payment) of hire
- Owner's/Charterer's bills of lading
- LMAA arbitration
Tanker Voyage Charters
- Drafting and advising on special provisions
- Post fixture disputes
- Standard form agreements
- The approach voyage
- Laycan and cancellation
- Responsibility for towage
- Safe ports, berths and anchorage
- Demurrage
- Trading limits
- Payment and recovery of freight
- Damage to ship caused by cargo
- LMAA arbitration
Shortage Claims
In relation to shortage claims it is important to emphasise that there is no such thing as a trade ullage. If there were, it would amount to the owner having a licence to steal cargo. Whilst there will be a slight loss of hydrocarbon cargoes due to evaporation on the voyage (light ends only) this should be nominal. With the advent of crude oil washing (cow) there should not be any rob.
In the absence of a fortuity any shortage in bulk liquid cargo is a paper loss. The vast majority of shortages that we handle result from documentary errors, they are primarily overstated bills or based upon improperly calibrated shore tanks at load and disport.
In this limited specialist market of high value vessels frequency of off take is essential. Consideration of the provisions relating to responsibility for damage to offshore loading and discharging facilities is required. These contacts are normally long-term and may be likened to contracts of affreightment.
We have a high volume of time chartered clients and provide a cradle to grave service, looking after all legal aspects of pre-fixture acceptance of terms and post-fixture disputes. This involves everything in the nature of FD&D as well as cargo claims brought either by receivers or occasionally by sub-charterers or disponent owners. In recent years there has been a growth of damage to ship claims caused by aggressive cargoes, this noticeable increase is in addition to the more usual ship damage caused by breach of a safe port warranty.
The Asbatankvoy charterparty
The Asbatankvoy Charterparty form is the work-horse of the tanker market. We have a wealth of experience in relation to this and other standard forms. We have noted that there has been an increase of claims for delay including the loss of market value these may arise from the vessel missing the cancelling date producing claims for delay, which can be sustained if the vessel failed to commence the approach voyage in good time. Breach of the safe port warranty can cause damage and delay. Demurrage claims are themselves liquidated damage claims for delay.
Common types of shortage claims
- Bills of Lading
- Obligations of the carrier
- Identity of claimant
- Shortages - prima facie burden of proof
- ROB and trade ullages
- Hague / Hague-Visby / Hamburg Rules defences
- Ships tanks vs shore tanks
- Calibration of tanks
A comparison of shore tank vs shore tank is a comparison of apples with pears, whereas a comparison of ships tanks after load and before discharge is a bullseye.