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Risk and Insurance Provisions of Offshore Operations Agreements

Russel F. Sammis, Offshore Exploration, Drilling and Development (1975)

PARTIES TO BE CONSIDERED

The first general category will be the leaseholding oil company and its partners, collectively referred to as the Operator. The contract to be discussed will be the operating agreement.

The second entity will be the drilling contractor and we will examine the drilling contract and also the drilling contractor's agreements with service contractors.

The third group will be entities furnishing materials or services to the drilling operation and we will refer to these entities as service contractors. Since service contractors may be engaged by either the Operator or the drilling contractor, it will be necessary to examine the contract and its implications in both cases.

RISK IDENTIFICATION

Before even considering the contracts, it is necessary to identify the risks that will be encountered and determine how they are to be shared or distributed among the several parties. Finally, we will see what types and amounts of insurance may be needed.

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FUNCTION OF INSURANCE

The function of insurance is to fund a loss arising from the identified risks. With one exception, we will suggest that unless there is concern about the ability of one of the parties to be financially responsible for obligations undertaken in a contract, detailed knowledge of the insurance arrangements of that entity