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Welcome to our second special edition of the Standard Bulletin

focusing exclusively on offshore matters.

Since our last offshore edition of the Bulletin was published, in October

2006, Standard Offshore has continued to grow. The global expansion in

the offshore oil and energy business has resulted in large numbers ofnew units coming onto the market, and the Standard has taken

advantage of this activity. More offshore tonnage has joined the Club,

both in the shape of new Club members and as entries in existing fleets.

We now have 55 offshore members entered in the Club, and the offshore

entry includes every type of unit, from the largest FPSOs through offshore

installation vessels and cable-layers to AHTs and supply boats. Standard

Asia, our Singapore based Club, has been particularly active in the

offshore sector this year.

In the meantime, we have also been improving and expanding our

offshore team. Although the Standard Club has underwritten oil and gas

business since the first drillships entered the North Sea in the 1970s anda specialist team has supervised the Clubs offshore business since 1999,

it was only last year that we decided the time had finally come to

consolidate our offshore business in one syndicate.

On 1st December 2006, the offshore syndicate came into being and now

that we have done it, we are rather surprised it took us so long! Robert

Dorey as syndicate head and Sharmini Murugason as syndicate claims

director lead a team of specialists who handle all aspects of the offshore

members day-to-day business. As a repository of knowledge and

expertise, the syndicate is the natural result of the Clubs ongoing

commitment in this area, and working with Offshore Director Barbara

Jennings, they provide us with an excellent platform to further expand theClubs offshore portfolio.

In the meantime, the Standard Offshore brand has been rolling out in

other ways during the past year. We held our first Standard Asia Offshore

Forum in Singapore in December 2006. More than 65 club members from

Asia and Australasia and representatives from the shipping, offshore, and

oil and gas sectors attended the one-day seminar at the Shangri La Hotel.

The event was judged so successful that it is being repeated later this

year. Standard Club representatives have also been invited to speak at

conferences in Houston, Norway and Dubai, and we are proud of our

teams ongoing contribution to industry training and debate.

In This Issue

- OFFSHORE REVIEW

- REINSURANCE REVIEW

- SPECIALIST OPERATIONS AND CAR

- HARMONISING FPSO PROJECT CONTRACTS

- NEW BIMCO CONTRACT

- KNOCK-FOR-KNOCK

- CONSEQUENTIAL LOSS

- OFFSHORE FORUM

- ASIA OFFSHORE

BY ALISTAIR GROOM,

CHIEF EXECUTIVE

+44 (0)20 7522 7422

[email protected]

Standard BulletinOctober 2007

The Standard Steamship

Owners Protection

& Indemnity Association

(Bermuda) Limited


Owners Protection


(Europe) Limited


Owners Protection


(Asia) Limited

Standard Bulletin is published by

the Managers London Agents:

Charles Taylor & Co. Limited

International House

1 St. Katharines Way

London, E1W 1UT

England

Telephone: +44 (0) 20 7488 3494

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www.standard-club.com

Please send any comments

to the Editor

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Telephone +44 (0)20 7522 7566

The Standard

Special Edition - Offshore

CONTINUED ON PAGE 2

BARBARA JENNINGS

DIRECTOR, OFFSHORE

+44 (0)20 7522 7454

[email protected]
mailto:[email protected]:p&[email protected]://www.standard-club.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.standard-club.com/mailto:p&[email protected]:[email protected]


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BY MIKE DEAN,

DIRECTOR OF CTC'S BUSINESS DEVELOPMENT UNIT

+44 (0)20 7759 4927

[email protected]

This in turn brought new players into the insurance market with

commensurate increased capacity. If contractors and operators were able

to do so, they tended to buy less insurance and to absorb more risk

themselves. So did direct insurers, who bought less reinsurance and took

larger retentions.

All of these trends are putting a downward pressure on rates, but this has

yet to lead to any significant softening of the market. Insurers are able to

command top rates as regards capacity risks or those operating in the

most exposed geographical areas of the world. In the energy sector, we

still think of 'Piper Alpha' as being a huge loss. Whilst in real terms it was

indeed catastrophic, it falls a long way short of the top ten worldwideinsured losses. Interestingly, the top ten losses are all the result of natural

disasters, except for 9/11. Of those nine natural catastrophe losses,

seven were in the United States, the other two being in the Far East and

Europe. Clearly, if you are an operator or contractor working in and

around the southern United States, Caribbean or Gulf of Mexico, you are

going to be paying a lot more for your insurance than those in other parts

of the world.

What we have today are all the above competing with pressures of recent

historical losses, a more recent good year, increased capacity and

competition.These combine to create an anxious and fragile market, with

insurers trying to hold the line wherever possible and buyers seeking some

amelioration of the post-Katrina premium hikes in the belief that 2005

and not 2006 was the aberration.Who knows - back to the crystal ball!

2007 Offshore Industry Review

In last year's bulletin, we talked about the strong demands for contractor

services. This trend remains within the industry and, on a recent drive

across the Cromarty Firth just north of Inverness, it was apparent that

even the stacked rigs that have adorned the seascape for the last decade

had finally disappeared. So whilst the industry remains buoyant, what of

operating expenses?

For those working in the energy sector, insurance costs have always been

a major item. One of the difficulties with regard to premium levels has

been their unpredictability and volatility. The nature of P&I Clubs is such

that to some extent their very structure enables much of this volatility to

be removed. But this ability is less apparent in the wider insurance

industry.

We know that the energy losses of 2005 amounted to around US$20

billion and, whilst 2006 was relatively benign, the problem for insurers

and reinsurers is not having a crystal ball - or at least one that works.

The models that are being used have been shown to be inaccurate at

best and sadly lacking at worst.

Modelling aside, the insurance industry is mostly reactive to events,

and right now, we are still in the post post-Katrina period. We saw rates

rise dramatically in late 2005 and continue to rise during 2006.

Industry Review

On that note, BIMCO contracts are some of the most widely used in the

industry and, this year, we are pleased that representatives of the

Standard Club were invited to sit on three of the subcommittees currently

redrafting contracts used widely by the offshore industry. Barbara

Jennings sits on the subcommittees to revise Heavycon and to produce a

new form for the mid-size heavy lift business, whilst Robert Dorey is

representing the clubs on the committee that is revising Bargehire. Grant

Hunter from Bimco writes on page 9 of this Bulletin about the

developments in the Heavycon form.

In insurance, as in the rest of the industry, business does not stand still,

and this year has seen a change in the way the International Group

approaches towage. In many previous editions of the Bulletin, we have

commented on the regrettable erosion of the knock-for-knock principle in

offshore contracts, particularly in supply boat charterparties. Although we

firmly believe that knock-for-knock is and remains the fairest and most

effective way to approach offshore liabilities, we are also aware that toorigid an approach by insurers can make life difficult for their clients. This

year, therefore, we were happy to support a move by the International

CONTINUED FROM FRONT COVER

Group of P&I Clubs to increase the numbers of towage contracts that

can be pooled, despite not adhering to knock-for-knock principles, if the

member is contracting in jurisdictions that do not uphold knock-for-

knock. On page 10 of this edition of the Bulletin, Sharmini Murugason

examines knock-for-knock worldwide in a comprehensive review that we

believe is the first of its kind. We also continue to offer our contract

review service to members, providing them with a full analysis of their

insured exposure under individual contracts, whether at the negotiation

stage or once the contract has been finalised.

Also in this edition of the Standard Bulletin, we consider the key

contractual issues that can arise in an FPSO project, courtesy of William

Cecil of solicitors Curtis David Garrard; we examine the interface between

P&I and CAR insurance with broker David Sharp; and we take a look

forward to this years London Offshore Forum in an interview with one of

our speakers, Marcus Jones of Lloyds Register. All this is in addition to

our regular overview of the energy and insurance markets andexamination of legal updates of particular relevance to our members. We

very much hope you will enjoy reading this issue of the Standard Bulletin

as much as we have enjoyed putting it together, and we look forward to

receiving any feedback or suggestions you may have.
mailto:[email protected]:[email protected]


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BY STUART CAPEWELL,

REINSURANCE DIRECTOR

+44 (0)20 7522 7459

[email protected]

At Lloyds, we now see the clear influence of the Franchise Performance

Directors initiatives. These include very close monitoring of each

syndicates performance compared to their stated Realistic Disaster

Scenario submissions. For the first time in 2005, these included a Gulf of

Mexico hurricane causing US$10 billion of insured offshore losses (and

US$50 billion onshore). The modelled loss had a damage track almost

identical to that of Hurricane Rita. The fact that individual syndicates have

experienced losses both above and below their own predictions has led

to a huge demand for clearer recording and monitoring of exposure data

in this sector.

The long range forecasters at Colorado State University this year warnedof expected Atlantic Basin hurricane activity at twice the average levels,

with five major hurricanes projected in 2007. It is timely that new

offshore energy modelling tools such as Eqecat are being launched to

help insurers quantify their offshore risks, leading to improved pricing and

better use of capital.

We dont believe that any single year, either good or bad, defines whether

a reinsurer has a good strategy or whether it is able to execute its

strategy effectively. Reinsurance is a long-term business, and a

reinsurers performance can only be quantified over a multi-year period.

It is capacity, stability and consistency that we value in our reinsurers.

At the Club, we view our role as ensuring not only that our reinsurershave the resilience to handle large losses, but they will be there at the

next renewal, providing stable capacity in the turmoil that inevitably

follows close upon catastrophe.

2007 Reinsurance Review

In the last two years, the reinsurance industry has experienced two

extremes. 2006 was as exceptional from a positive perspective as 2005

was from a negative perspective. Most of the companies that made

losses in 2005 made large profits in 2006; in fact, one was partly the

result of the other. The losses of 2005 led to significant price increases

and dislocations in the United States windmarket, resulting in

considerable profitability when no major storms occurred.And, in addition

to a scarcity of hurricanes, there were no major insurance losses in 2006

from earthquakes, typhoons, floods or tsunamis.

The other remarkable thing about 2006 was that most lines of business

produced record profitability in the same year. For a global diversified

reinsurer with exposure in various markets, it would be normal to expect

some lines of business to face increased losses or softer market

conditions. The 2006 results have shown that a professional reinsurer

can withstand the turmoil of years like 2005, respond to the opportunities

that invariably follow, and earn back the lost money in a very short period

of time.

Quantifying risks for the offshore energy market is markedly different and

more complicated than modelling for onshore property risks. Most

damage onshore is attributed to wind, but losses to the offshore energy

market are primarily due to severe waves and currents generated by astorm, as well as undersea landslides. Whilst some of the risks to

offshore energy include property exposures to platforms, well heads and

pipelines, an important component of the risk is centred on continuous

production issues.

It is not surprising that FPSO facilities have developed to become an

increasingly popular solution worldwide for offshore field development.

Within the US Gulf of Mexico, the dominant production facilities have

been fixed structures and floating production systems based on Spar,

TLP and semi-submersible platforms. Higher oil prices, and significant

ultra deepwater prospects extending farther beyond established pipeline

infrastructure, make FPSOs an increasingly viable option, especially as

they can move off site if there is a threat of hurricanes.

The Minerals Management Service, the federal regulatory agency that

overseas oil and gas activities offshore United States has recently

approved the first FPSOs to operate in United States territorial waters.

It has approved an FPSO for the Cascade/Chinook fields for Petrobras,

and in the meantime, Helix Energy Solutions have approval for their

floating production unit Helix Producer 1, which will be dynamically

positioned and capable of disconnecting from the risers in the event of

tropical storms or hurricanes. This is foreseen as being a growth area for

the Club as we are well positioned to offer high levels of flexible cover for

operating FPSOs both on and off the riser.

Reinsurance

THE LUTINE BELL AT LLOYDS


4/16

BY DAVID SHARP

EXECUTIVE DIRECTOR, OPERATING GROUP,

AAA INSURANCE & REINSURANCE BROKERS LIMITED

+44 (0)20 7220 8010

[email protected]

4

David Sharp makes the point that the gaps between P&I and CAR covers,

in most cases, relate to the operation and interpretation of contractual

and hold harmless indemnities. The commercial reality of the offshore

installation market is that there is no standard industry agreed wording

covering the obligations of each contracting party. This means that every

single contract is different. The contracts will reflect the prevailing market

bargaining positions of the parties, which can be seen not only in scope

of work definitions but also in respect of the liabilities that each party

assumes. Many of the deviations from a knock-for-knock regime in

contractually assumed liabilities represent the exclusions or deductibles

applicable to other insurances.

Whilst the Club has a wide reinsurance programme, gaps in CAR and

similar covers cannot be normally accommodated under our extended

covers. It is therefore imperative that members ascertain at the outset

whether their contractually assumed liabilities fall under their P&I or

extended covers. The Club operates a contract review system so that

cover can be positively confirmed. Contract reviewers in the Offshore

Syndicate work with the underwriters to produce a comprehensive

contract review so that there is clarity and certainty in respect of the P&I

cover. Any gaps in cover can then either be dealt with by a further

extension of cover if appropriate, or by the member and his contractual

partner clarifying his access to the CAR cover or reframing the

contractual liabilities as necessary.

P&I Specialist Operations and the Interface

with Construction All Risk Policies

P&I Specialist Operations are set out in a wide and non-exhaustive list of

marine activities in the Standard Offshore Extension or Rule 19.11 of the

Rules. The Specialist Operations exclusion has its roots in a desire by the

traditional shipowning market not to mutually share liabilities arising out

of activities that involve exposures beyond the carriage by sea of persons

or property under a contract subject to statutory principles of liability.

Many Specialist Operations liabilities involve activities that have little or

no overlap with other insurances. One significant exception to this is theinstallation and marine construction market, where shipowners may

transport and/or install property that falls under the Construction All Risks

policy placed by an oil company client or other principal.

The P&I Perspective - by Robert Dorey

This article addresses some of the areas of overlap between the two

covers, and David Sharps article opposite looks at those issues from the

Construction All Risks perspective. From the Club point of view, where a

member has bought back liabilities arising from the nature of the

Specialist Operation, the Club cover still excludes liabilities in respect of

failure to perform or fitness for purpose/quality of the members work and

also liabilities in respect of contract works. The exclusion for failure toperform is because the exposure is a pure economic loss.The exclusion

in respect of liabilities for contract works arises primarily because of the

existence of a CAR policy, which is the proper market for these risks.

Underwriting

BY ROBERT DOREY,

SYNDICATE DIRECTOR

+44 (0)20 7522 7433

[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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a primary insurance clause would have meant that any collectible

claims under a valid P&I insurance had to be exhausted first. This is no

longer possible under the standard CAR policy, which only provides such

cover on more restricted wording to the Operator for removal of wreck of

its own properties.

Indemnity Arrangements

What benefit is really being conferred on the contractor, absent coverage

for vessel-related liabilities and removal of wreck? This question has

more resonance when it is considered that mutual indemnity

arrangements between Operators and contractors will theoreticallyinterpret third-party claims at site as between the two parties.

Mutual indemnities, however, come under the microscope when a

catastrophe occurs, particularly if it involves loss of life, and courts may

not always construe the contractual indemnity clauses in the manner

intended. It must also be recognised that such indemnities can only be

effective between contracting parties. Different contractors at the

worksite will not be in a contract with each other, only with the Operator.

The same, if not more complex, position arises with subcontractors.

Contracting strategies in the UK have only partially dealt with this position

by utilising what is known as the small family indemnity concept. This

provides that the contracting parties are grouped into larger entities. On

the one hand is the Operator Group comprising the Operator and its co-venturers, plus their affiliates, but excluding any member of the

Contractor Group. The latter consists of the contractor, its

subcontractors of any tier who are performing work at construction sites,

and their affiliates, but excluding any member of the Operator Group.

This grouping is favoured by CRINE and its successor organisation LOGIC

in seeking to create more uniformity in UK offshore contracting.

The inclusion of subcontractors within this latter group creates an

attempt to bring subcontractors within the ambit of the indemnity

arrangements. Under English law, this would not have been legally

enforceable until the passing of the Contracts (Rights of Third Parties) Act

in 1999, which enables persons who are not parties to a contract to

enforce rights under the contract. However, a gap still exists in terms of

liabilities between different contractors and their subcontractors.

An alternative is the large family concept, which includes the Operators

other contractors and subcontractors in the Operator Group, and is

commonly used in Norway, where the basic contract - the NF97 form -

includes the large family as standard.The Norwegian contracting regime

allows for standardisation in the indemnity structure, thus each contract

is on a back to back, word for word basis, which is essential if the

principles are to be upheld and the indemnities to operate in the manner

intended within the entire community involved in the construction project.

Liability Cover Available to Contractors Under

Offshore Construction All Risks Policies

The CAR Perspective - by David Sharp

There has been much discussion regarding the extent to which offshore

contractors are insured under CAR policies arranged by their Principals,

which in most cases, will be the oil company operating the lease block

(the Operator). The topic has been the focus of legal disputes in the UK,

United States and Australia, to name but three jurisdictions. Invariably,

practice within the oil industry determines that it is the Operator who

arranges the CAR insurance, there being good reasons for this, albeit thecontractor generally has primary responsibility for the works whilst under

his control. The Operator will include all his contractors and indeed

subcontractors as Other Assured parties under the CAR insurance, but

such parties will only have the benefits of the policy to the extent made

available under contract.

Cover

The contract should then spell out the basis of the cover arranged. So far

as concerns physical damage risk, this usually occurs with some clarity,

but many contracts are silent on the issue of third-party cover. The

contract itself will usually stipulate that each party is responsible for its

own third-party losses, but the Operators CAR insurers are not unhappyto provide such protection to the contractors on the unwritten

understanding that the contractor will have a primary policy in force. The

contract will therefore normally stipulate that the contractor effects a

primary comprehensive general liability policy up to certain limits. Third-

party cover under offshore CAR policies is arranged as a separate section

(Section 2) to physical damage, for a limit generally pitched at between

$50 million and $100 million per event, such cover being available to the

Operator from the ground-up, and for contractors in excess of their

primary policies. However, there is only one limit per event provided for

all parties.

It used to be the case that certain contractors would consider this benefit

as providing them with Excess Protection and Indemnity Risk on vessel

operations connected with the CAR works, sometimes in order to protect

their existing arrangements. This is no longer possible because of the

existence of a Watercraft exclusion in Section 2 coverage, which CAR

insurers will not normally delete for contractors. The contract will

therefore stipulate that contractors should have P&I insurance in

existence for specified minimum limits. Given the specialised vessels

exclusion in force where the P&I is provided by a Club, the contract

should ideally stipulate that this exclusion is deleted, although

interestingly, it very rarely does in so many words.

Another feature of CAR coverage that was historically provided was

removal of wreck cover that enabled any insured party to recover claims

for removal of wreck of their properties, howsoever arising, provided that

a liability existed for wreck removal or the wreck interfered with current

operations. Thus contractors could have the benefit of this cover, although CONTINUED OVER


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Industry Mutual Hold Harmless

In the absence of a Norwegian model for structuring indemnities, the

offshore industry in the UK has, through LOGIC, introduced an Industry

Mutual Hold Harmless (IMHH) scheme to seek to avoid any such gaps as

might still exist in the small family concept. The IMHH is not tied to a

specific contract but is designed to underpin all offshore activity in the oil

and gas industry on a global basis. Participants need only enter the

scheme once by signing up for the long term. It is not intended that the

IMHH Deed that participants sign takes precedence over existing or future

contractual arrangements; its purpose is to address liability for property

damage or personal injury where there is no contractual arrangement inforce between the respective parties.A significant number of the parties

working on the UK Continental Shelf have signed up to the scheme.

Conclusion

So, to come back to the question what benefit is actually available to

the contractor by accessing the Operators third-party cover under CAR

Section 2? In theory, these must be very little. Off-site liabilities (i.e.

during tows and movements to the field) will fall to be dealt with by P&I

insurance. Removal of wreck of contractors vessels and equipment is

excluded under the CAR policy. On-site liabilities should be dealt with by

indemnity arrangements and, so far as the gap in terms of non-

contracting parties is concerned, should be dealt with by parties signingup to the IMHH Deed or similar schemes. It must be concluded that the

exposure in relation to offshore operations is very small, possibly reduced

to the risk that indemnities will fail to operate in the manner intended or,

where parties have not signed up to IMHH schemes, that no indemnities

exist. It follows that any issue with respect to the interface between the

CAR policy and the P&I insurance so far as concerns the contractor -

narrows in similar fashion to the point that it is marginal.

David Sharp has worked in energy insurance in the London

Market for more than 40 years. He is the author of the seminal

book Offshore Oil and Gas Insurance, published by Witherby& Co, London in 1994, a new edition of which is in preparation.


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BY WILLIAM CECIL

PARTNER, DAVIS GARRARD LLP, LONDON

+44 (0)20 8734 2837

[email protected]

First, the operator can enter into an EPIC (Engineering, Procurement,

Commissioning and Installation) contract with the head contractor for

the provision of a fully functioning FPSO at the required field location.

Usually the head contractor will, in return for payment of a lump sum

fee, assume vis--visthe operator full responsibility for completing the

construction or conversion of the FPSO, its hook-up and

commissioning offshore at the field. Where the FPSO is supplied under

an EPIC contract, the operator will normally retain title to the unit

throughout the project. Indeed, where the project involves a conversion

rather than a newbuilding, the operator will often purchase the tanker

at the outset and free issue this to the head contractor for the

purposes of the construction works and topside installation.The use of

EPIC structures in the offshore sector has become a controversial issue

in recent years, with a number of major contractors suggesting that

the risk/reward balance associated with lump sum contracting has

become too heavily weighted in favour of the operators.

The second option is for the operator to enter into an agreement with

the head contractor for the provision of the FPSO and associated

operating and management services.This is in effect a time charter of

the unit, although this is normally known as a Production Services

Contract or an operating lease. The key differences between this

scheme and the EPIC approach are that the head contractor, rather

than the operator, normally assumes full responsibility for themanagement and operation of the unit post-delivery and retains both

title to it and any entitlement to the residual value.

There are, of course, a number of reasons why an operator might

choose to enter into an EPIC contract in preference to adopting the

Production Service Contract approach, or vice-versa. In addition to the

risk issues indicated above, tax/customs considerations will often be a

key driver. In order to minimise these potential exposures, it may for

example be prudent for the operator to acquire title to all or part of the

FPSO equipment prior to entry into the host country, in which event,

the Production Services Contract approach may be unworkable.

2. The Modular Strategy

The alternative approach is for the operator to contract separately for

the component parts of the project i.e. design, procurement,

construction and installation.The operator may also decide to manage

the marine and offshore operations of the FPSO itself. This is, however,

relatively rare, given the scale and complexity of the tasks involved,

and few operators are able to maintain the necessary expertise and

skill sets needed to achieve this successfully, and most do not even

attempt to do so.

Harmonising FPSO Project Contracts

Advances in recent years in FPSO vessel technologies have

fundamentally altered the economics of offshore oilfield development.

Floating production systems represent a safe and efficient method of

exploiting previously inaccessible deepwater fields they are also a cost-

effective means of developing marginal fields that would otherwise be

incapable of supporting the construction and decommissioning costs of

fixed platform development.

To employ this technology, the oilfield operator must obviously acquire, or

engage the use of, a suitable vessel to act as an operating platform and

an integrated crude oil processing and storage system. Furthermore, the

system must be capable of meeting the requirements, both technical and

commercial, of the project in question.To achieve this normally requires

the operator to enter into a range of complex contractual arrangements.

Principal FPSO Project Phases

The first principal phase of the project is design and engineering. This

stage encompasses the conceptual design and front-end engineering and

design, through to the more detailed engineering phase. These tasks will

often fall within part of the head contractors workscope. Next comes the

construction of the hull or the conversion of an existing vessel. Thus an

existing vessel will need to be purchased for conversion or, particularly

for projects involving harsh environments or extended life, a hull will need

to be built from scratch.This is followed by the construction of the

processing facilities. The topsides contract will define the contractual

relationship between the owner and processing contractor. This will either

form part of the shipyard construction or conversion contract, or will be a

separate contract with a specialist contractor. Once the construction

stage is completed, the FPSO unit will be towed or transported to the field

location1. Following arrival at the field, the unit will be installed and

hooked up with the subsea system. This is usually undertaken pursuant

to a separate contract between the operator or head contractor and

specialist subcontractors. The head contractor will then undertake

commissioning of the unit. Finally, once the FPSO has been accepted by

the operator, the unit will need to be operated and maintained throughout

its life at the producing field until demobilisation.

FPSO Contract Strategy

1. The Turnkey Strategy

The most commonly employed approach to FPSO contracting is for the

operator to employ a single contractor, referred to here as the head

contractor, to manage the project and to engage any subcontractors

required for those elements of the project that the head contractor is

not himself able or willing to undertake. As the name suggests, the

operator is looking for an integrated, managed solution. When

employing a turnkey strategy, the operator broadly has two options.

1In addition, the hull may be towed from the shipyard building the hull to the facilities of the topsides contractor,

if different.

Contractual


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crude regime2, it is well established in the offshore sector and has the

very great virtue of simplicity.

In the absence of a knock-for-knock arrangement, English law will hold

each party working at the f ield liable (primarily in negligence) for all

foreseeable losses resulting from its negligent acts or omissions and

those of its employees. The size of the potential liabilities involved

renders this exposure unacceptable for the majority of offshore

contractors and their insurers; moreover, each contractor working at the

field will, to the extent that insurance is obtainable, be required to insure

to the full extent of the damage for which it is potentially liable and this

multiplicity of insurance will add significantly to the costs of the project.

The indemnity is normally agreed to apply to damage or injury to the

operator and contractor groups.A key issue in the indemnity structure

will be whether the operator group is broadly or narrowly defined. If a

broad approach is adopted, the operator group will include all of the

operators other contractors working at the field. Alternatively, where a

more narrow approach is adopted, the operators indemnity will not

extend to the property and personnel of its other contractors.

A narrow definition of operator group can cause the head contractor

significant difficulties, particularly if he is working in close proximity with

subcontractors of the operator, who are not included within the definition

of operator group and therefore are not covered by the indemnityprovided by the operator.

2Per Morrison in the unreported case of Smit International (Deutschland) Gmbh v Josef Mobius.

Key Contract Issues

The contractual workscope

Assuming that a turnkey contracting strategy has been adopted, the most

important issue in any FPSO project contract is defining and agreeing the

Contractual Workscope, i.e. the precise scope of the works to be

undertaken and the allocation of responsibility between the parties. A key

element in this context is the question of delegating design responsibility

between the operator, the head contractor and the subcontractors of each

of them. The Contractual Workscope is normally set out in a technical

specification.A number of factors render the agreement of the

Contractual Workscope a complicated process.

First, many operators express their requirements for FPSO tonnage partly

in functional, rather than purely descriptive, terms. This should in

principle work well, except that shipyards are more accustomed to

dealing with descriptive specifications and are often cautious about

accepting responsibility for guaranteeing functionality. This is particularly

problematic given that the FPSOs functionality cannot normally be

demonstrated before the unit undergoes acceptance tests at its first

producing well. Problems can also arise where there are inconsistencies

between the descriptive and functional parts of the specification.

Second, the complexity of the FPSOs onboard processing systems means

that these are frequently designed and engineered, in whole or in part, by

a large number of third-party contractors, some of whom may be

selected by, and in some cases employed by, the operator rather than the

head contractor, the shipyard or the topsides contractor. The multiplicity

of the parties involved can often lead to serious questions concerning the

delineation of their respective responsibilities and workscopes.

The third complicating factor relates primarily to FPSO conversions,

where the head contractor and its subcontractor, the shipyard, will be

required to incorporate new designs and materials within an existing

structure in order to permit the new and the old to operate together as an

integrated whole. Problems can arise at the interface between new and

old, particularly where the old structure is unable to cope with additionaldemands placed upon it after the conversion.The contract must be clear

as to which party is responsible for this interface.

Indemnities

Indemnities are another key contractual issue. As in many types of

offshore contract, indemnities form an important part of FPSO project

structures and, in terms of harmonisation, it is vital to ensure that these

provisions are as far as possible consistent between the head contract

and the principal subcontracts. The indemnity structure most commonly

employed is the usual knock-for-knock approach under which the

operator and the head contractor indemnify each other against property

damage, personal injury and death sustained by members of their owngroups and employees in the course of undertaking the project

irrespective of cause (i.e. regardless of whether the damage was inflicted

negligently or in breach of duty). Although the knock-for-knock structure

was recently described by an English High Court judge as a blunt and


9/169

commercial practice. The new mid-size form will offer a comprehensive

trade-specific alternative to the less than ideal generic forms currently

in use.

A drafting group consisting of trade representatives from companies such

as BigLift Shipping, Dockwise, SAL Shipping, Heerema and Fairmount is

currently working on the revision of HEAVYCON and is making good

progress. It is hoped that the project will be completed by November

2007. To ensure consistency between the revised HEAVYCON and the new

mid-size contract, some members of the HEAVYCON drafting team will

participate in the development of the new standard form for the mid-

sized trade. Work on the new form will begin in September and should be

completed towards the end of 2008.

The great benefit for end users is that this will be a form developed by

people working in this trade and entirely familiar with the contractual

needs of the business. Tied to BIMCOs sound track record for producing

clearly written and well-balanced standard forms of contract, the new

heavy lift contract should make a welcome addition to the existing suite

of BIMCO offshore contracts.

An alternative solution is to utilise a stand-alone Field Mutual Hold

Harmless agreement, such as the one prepared by CRINE/LOGIC. Under

such an agreement, each contractor working at the field assumes

responsibility for its own property and personnel and indemnifies all other

contractors against loss or damage to such property/personnel incurredworking at that field. If such a scheme is not put in place, however, it is

obviously sensible from the perspective of both the operator and the head

contractor that they each ensure that, in the contracts they each place

with their own subcontractors, the knock-for-knock principle contained in

the head contract is adopted.

Post-delivery defects

A third key issue is the question of post-delivery defects. This is one of

the most difficult areas in which to harmonise the various project

contracts, particularly in respect of defects that affect the FPSOs

operating status and, therefore, the income stream under the head

contract. In the event of a defect affecting the FPSOs operations, theoperator will almost certainly insist on a reduction in the contractual day

rates, sometimes to a zero level, while the problem is resolved. However,

while most shipyards and topsides contractors are prepared to provide a

BY GRANT HUNTER,

HEAD OF DOCUMENTARY DEPARTMENT, BIMCO

+44 (0)1993 772 297

[email protected]

New BIMCO Mid-Sized Heavy Lift Contract to

Join Revised HEAVYCON

The offshore industry is a tremendous user and supporter of BIMCO

standard contracts. Over the years, BIMCO documents have established a

firm and welcome foothold in this niche market. In some sectors, such as

heavy lift, BIMCOs charter parties and contracts enjoy almost universal

use.

The heavy lift sector is currently experiencing something of a boom, with

a sizeable number of newbuildings on order. One particular growth area

over the past few years has been in the lift on/lift off and roll on/roll off

mid-sized heavy lift sector. Unlike the super-heavy lift market, which has

relied on the HEAVYCON form for its contractual needs, the mid-sized

sector tends to operate on a more conventional cargo basis where goods

are stowed below as well as above deck.

The HEAVYCON form was originally designed with special offshore

projects in mind and uses the knock-for-knock principle as the primary

basis of liability. In contrast, the mid-sized sector generally relies on

conventional cargo liability regimes such as the Hague/Hague-Visby

Rules. Using HEAVYCON for the latter type of operation is not ideal and

requires significant amendments to be made to the form.

As a result, operators in the mid-size sector have generally relied on

using an amended CONLINEBOOKING Note or similar generic form as

their contractual platform. With this in mind, BIMCO has in response toindustry demand decided to develop a new standard contract for the

mid-size heavy lift sector based on the CONLINEBOOKING Note, while

simultaneously updating the well-used HEAVYCON form to reflect current

contractual commitment to undertake the repair works, this is normally

limited to a period of 12 or 24 months from the date of completion of

their portion of the construction or conversion works. Further, they are

almost universally unwilling to assume any responsibility for associated

downtime. Experience shows that it is very difficult to achieve anymeasure of harmonisation between the Production Services Contract and

the subcontracts regarding the issue and, although this can be addressed

to some extent by loss of hire insurance coverage, this represents one of

the largest exposures faced by the head contractor.

Conclusion

After consideration of the key stages in an FPSO project, the contracting

strategies employed and the contractual issues that are likely to arise,

there is no doubt that these projects are highly complex. The success of

the project will in large part depend on the time and attention spent at

the early stages to ensure that adequate time and resources are invested

in the design and engineering stages of the project and to ensure that aproper and detailed contractual framework is put in place to cover the

construction, installation and eventual operation of the FPSO unit.

Contractual

CONTINUED FROM PREVIOUS PAGE

BIMCO is the worlds principal organisation responsible for

the development of maritime contracts and other related forms.

Barbara Jennings, the Standard Clubs Director, Offshore, sits

on the BIMCO Heavycon subcommittees.


10/16

such as industry-standard forms Towcon and Towhire or the UK or Dutch

standard towage conditions. The amendment recognises that certain

jurisdictions will not uphold a contract that allows a towing vessel to

avoid liability for its own negligence and to be indemnified by the

innocent tow for all losses arising from such negligence.The amendment

relaxes requirements for towage contracts where the concept of kfk is

unenforceable in whole or in part in that particular jurisdiction, provided

that those contracts do not impose liability for negligence of the tow on

the member and allow him to limit liability to the greatest extent possible.

We therefore felt it opportune to take a sounding on the recognition of kfk

contracts from around the world and, in particular, from thosejurisdictions with offshore activity. It was apparent from the responses

received that the concept is largely untested in most jurisdictions,

perhaps due to the tendency to retain English law and jurisdiction clauses

in Bimco standard contracts, but nonetheless the lawyers we approached

were prepared to form a view based on existing law.

Europe

In most of Europe, it appears that the courts will uphold kfk contracts

except in the case of wilful misconduct or gross negligence of the

management of a contracting party. Some countries such as Italy or

Germany may not enforce kfk contracts in the case of personal injury

claims. In countries that are subject to a Civil Code, such as Russia, it ispossible that the courts will refuse to apply contractual provisions if these

conflict with the applicable Code.

The Americas

In the United States, kfk contracts are enforceable as a general rule

except in the case of towage, where any agreement requiring the tow to

indemnify the tug is considered null and void. In Canada, kfk contracts

are widely used and accepted in the offshore industry.The same applies

in Venezuela where such contracts are likely to be upheld except in case

of wilful misconduct and, in Mexico, although kfk is not acceptable in

contracts with the state. In most other South American jurisdictions,

it appears that whether or not the courts uphold contracts on kfk termswill depend on the facts of the individual case, with the courts taking into

consideration such factors as the relative bargaining power of the parties

and whether clauses exonerating a party from the consequences of its

own negligence were specifically negotiated and accepted.Again, in

some jurisdictions, kfk provisions may not be upheld in the case of

personal injury claims or a conflict with a Civil Code.

Africa and the Middle East

As a general rule, it would seem that kfk contracts will probably be

upheld in these jurisdictions, although the law is not sufficiently

developed in many West African jurisdictions to be able to predict the

outcome of any case with great certainty.

International Recognition of Knock-for-Knock

Contracts

Mutual allocation of risk by way of knock-for-knock (kfk) contracts is

common in the offshore industry and industry standard contracts

incorporating kfk principles such as BIMCO Supplytime have been

accepted by the International Group of P&I Clubs, thereby affording

poolable cover. These contracts operate an apportionment regime where

each party takes responsibility for loss/damage to its respective propertyand for the death/injury of its personnel irrespective of each partys

negligence and provides the other with a corresponding indemnity.

The benefits of such a regime are great: it provides legal certainty and

avoids substantial costs being incurred in proving fault; it encourages an

open exchange of information, which improves safety in this high-risk

industry; it avoids double insurance thereby reducing the costs of

insurance; and it is a reflection of the proportionate risk and reward ratio

in the offshore industry where an accident could have substantial cost

implications for the operators involved.

Most of these contracts incorporate English law and jurisdiction, and the

concept of kfk contracts is recognised and well established in Englishlaw, for example, in Smit International (Deutschland) Gmbh v Joseph

Mobius (unreported). However, there will be occasions when contractors

are required to incorporate a different law and jurisdiction clause in their

contracts, perhaps to reflect provisions up the chain of contracts or to

incorporate the law of the jurisdiction where the ultimate client is based

or where the activity in question takes place.There is a risk that those

other jurisdictions may not recognise the legality of kfk provisions.

The pooling agreement

This issue was acknowledged by the International Group when it

amended the Pooling Agreement requirements of vessels providing

towing services with effect from 20 February 2007 (a commentary byBrian Glover on the extent of the amendment was published in the

Standard Bulletin16 May 2007). Prior to the amendment, it was a

requirement of poolable cover that such vessels contract on kfk terms or

on contracts that incorporate provisions even more favourable to the tug,

Knock for Knock Contracts

10

BY SHARMINI MURUGASON,

SYNDICATE CLAIMS DIRECTOR

+44 (0)20 7522 7434

[email protected]

Contractual


11/1611

Australia and Asia

As with the United States, in many jurisdictions, it appears that kfk

contracts will be upheld except in the case of towage. This is the case in

Australia where the Queensland Supreme Court recently overturned the

UK Standard Towage Conditions when it decided that the Conditions

contravened the Trade Practices Act 1974, the Australian unfair contract

terms legislation. In Asia generally English law, which upholds kfk

contracts, is likely to be followed as a persuasive authority, except in

Vietnam where a duty of care is imposed on tug owners and in Thailand

where parties are not entitled to contract out of the consequences of their

gross negligence. In China, the Shanghai Supreme Court recentlyconfirmed the enforceability of the BIMCO Heavycon form, although here,

too, the law voids any exclusion from liability in cases where a party has

been guilty of gross negligence or wilful misconduct.

Summary

It would appear that contrary to what might be assumed, the courts in

many countries where there is a developed oil and gas industry in fact

show a sophisticated understanding of the nature of kfk agreements and

are likely to uphold them in many cases. The main exceptions will be in

cases of senior level gross negligence or wilful misconduct or where the

individual contract conflicts with public policy or codified law. In countries

where there are no prior cases upholding kfk contracts, such contracts

are perhaps more likely to be upheld if clauses that exempt the parties

from the consequences of their own negligence are specifically

negotiated and agreed. Unfortunately, it would appear that towage is one

area where the courts are increasingly reluctant to completely exonerate

the tug from the consequences of its negligence and, in such cases,

members would be well advised to take advice from a suitably qualified

lawyer. Towage contracts concluded in jurisdictions that do not uphold kfk

can still be covered provided that the tug takes no liability for the tows

negligence and the members right to limit liability is protected.

The position in respect of individual countries is set out in full in an

extended version of this article available on our website: www.standard-

club.com/publications

This article is intended as a guide only and should not be relied upon as a

substitute for specific legal advice.
http://www.standard-club.com/publicationshttp://www.standard-club.com/publicationshttp://www.standard-club.com/publicationshttp://www.standard-club.com/publications


12/1612

BY JOHN CROUCHER,

OFFSHORE LEGAL EXECUTIVE

+44 (0)20 7522 7566

[email protected]

Consequential Loss Clauses in Offshore

Contracts

We examine a recent case (Ease Faith Ltd v Leonis Marine

Management Ltd [2006] 2 All ER) that underlines the importance of

clarity of language in consequential loss clauses.

Many pitfalls can arise in the interpretation of consequential loss clauses

in offshore contracts, a risk that the Club considered in March 2005 in

Marine Matters, the precursor to the Standard Bulletin. The article

concluded: Excluding consequential losses will not necessarily exclude

all losses consequent upon a breach of contract. If the parties want to

exclude direct losses, which can include economic losses, then theyshould be very clear in the language used.

Rules of construction

Subject to specific authority on the treatment of standard form clauses,

the basic and underlying rule of construction under English law can be

briefly summarised: in the absence of clear words to the contrary, any

ambiguity is to be construed against the party seeking to rely on that

clause (contra proferentem).

Legal

In the context of exclusion clauses, therefore, clear words are required to

exclude a liability that would otherwise have arisen. By way of example,

the courts have previously attributed precise technical meanings to words

so as to narrow the application of an exclusion where it is less than clear

whether the parties understood or intended such a distinction.

This rule has been applied, qualified and extended so as to form a

number of guidelines that are well recognised. For example:

(a) general words of exclusion will not normally be taken to cover serious

or fundamental breaches going to the root of the contract;

(b) clauses that purport to merely limit liability will be construed less

strictly than those seeking to exclude liability all together;

(c) an exclusion clause may not be given effect where doing so would

render the agreement devoid of contractual content so as to turn it into

a mere statement of intent.


13/16

loss of profit, loss of use, loss or production or any other indirect or

consequential damage for any reason whatsoever.

The court held that the words "loss of profit" referred to the loss of

profits generated by future use of the tug by the tugowner or the tow by

the hirer, whilst the nature of the loss in this case was more akin to a

diminution of price than a loss of profit. The Judge considered that

"there were very few, if any, losses suffered by a commercial concern

which could not be described as amounting to or producing a reduction in

profits", and that it must therefore be the case that clause 18.3 was

intended to have a restricted meaning. The correct interpretation of the

clause, in accordance with the Eiusdem generisrule, was to consider theterm "loss of profit" to be of the same nature as loss of use, both of

which should be considered contra proferentem. In following these rules

of construction, the court held that the losses that were claimed could not

be considered to fall within the exclusion clause, the purpose of which

was to exclude consequential losses such as the future use of the tug or

tow rather than those losses that could be more readily categorised as

direct losses.

Conclusion

In this case, the court was not prepared to use a broad construction of an

exclusion clause so as to apply it to direct losses in a similar manner to

those indirect or consequential losses that may properly be considered tofall within the second limb of Hadley v Baxendale. While a loss of profit is

potentially capable of being an indirect loss, the court was clear in its

view that clause 18.3 is not applicable to a claim for loss of profit that

is properly to be considered as a direct loss within the first limb of Hadley

v Baxendale.

Ease Faith Ltd v Leonis Marine Management is an important reminder

that even under standard form contracts, the potential for litigation is ever

present where there is no clear agreement on the precise nature of the

terms that have been agreed.

13

Direct and indirect losses

Another well-known rule of construction is that the exclusion of

consequential losses will not cover a 'naturally resulting' direct loss. This

distinction between consequential (or indirect) and direct losses is

established law deriving from the decision in Hadley v Baxendale (1854)

9 Exch 341. The judgment made a distinction as to whether the losses:

(i) arose naturally from the breach (i.e. direct losses);

(ii) were such that they may reasonably be supposed to have been in the

contemplation of both parties, at the time they made the contract, as a

probable result of the breach (consequential/indirect losses).

Therefore, when considering whether a loss is recoverable, it is

necessary to ask two questions, namely, whether the loss is foreseeable

under the test in Hadley v Baxendale and, secondly, whether any relevant

exclusion clause may be construed as being applicable to such a

foreseeable loss.

The International Ocean Towage Agreements Towcon and Towhire were

produced by BIMCO with a view to achieving clarity in apportioning

liability. The contracts have proved to be popular, and the simplified

knock-for-knock liability regime can be considered to have been

successful by virtue of a reduced level of litigation. An undoubted benefit

of using such standard form contracts is that the intent behind theclauses is often clear, thereby reducing the scope for dispute.

Notwithstanding this, while such standard contracts invariably have

consequential loss provisions, there have been a number of cases that

have sought to clarify the nature and extent of the liabilities such clauses

are designed to exclude.

Ease Faith Ltd v Leonis Marine Management

In the case of Ease Faith Ltd v Leonis Marine Management, a number of

complicated evidential issues and detailed facts were considered.

Amongst these was a question as to the correct interpretation of clause

18.3 of Towcon, which is designed to exclude liability for consequential

losses. By way of brief background, the facts in issue were as follows.The Kent Reliant had been purchased for scrapping in China with an

agreed date of delivery of the end April 2004. Ease Faith entered into an

agreement with Leonis for the services of the tug Naporistyi to tow the

ship to China (sub-towcon) and, in order to fulfil the sub-towcon, Leonis

entered into an agreement (the head towcon) with the co-defendants,

Cloudfree. The ship was delivered late, and the claimants issued

proceedings on the basis that the tug had failed to proceed with proper

dispatch and the defendant was therefore in breach of the sub-towcon.

Ease Faith claimed damages for, amongst other things, losses arising

because the late delivery caused the Chinese buyers to reduce their price

for the ship.

Both Leonis and Cloudfree sought to argue that the claimant's claim was

excluded by clause 18.3 of the standard Towcon form, which provides:

..neither the tugowner nor the hirer shall be liable to the other party for


14/1614

There will be some highly knowledgeable and experienced people in the

audience, and I see it very much as an interactive session. I aim to

generate a stimulating debate by asking relevant questions, and Im

genuinely excited at the prospect of discussing this subject with such a

wide range of experts. I hope that we can all learn from each other, that

well go home with fresh ideas and insights.

New Frontiers for the Offshore Industry

The offshore industry has become more complex and technically

challenging as oil companies venture into increasingly remote

locations. How best to manage the resulting risks will be among

the subjects debated at this years Standard Offshore Forum.

The worlds known oil and gas reserves are diminishing just as newly

industrialised nations such as China and India are pushing demand to

unprecedented levels. The inevitable result is that oil companies have

started to explore, drill and produce in locations that would once have

been considered too difficult and dangerous. The recent row over rights

to the Arctic suggests that it is just a matter of time before even this most

inhospitable of environments is explored for whatever may lie beneath

the seabed.

As the oil industry pushes into new frontier regions, it is encountering

new types of risk, and its still getting to grips with them, according to

Lloyds Register Oil and Gas Director Marcus Jones, a speaker at this

years Offshore Forum.

The difficulties associated with remote locations have been compounded

by increased political and supply chain risk, says Mr Jones.

Apart from the obvious dangers of instability in many territories, where

governments and their regulations may change quickly, there are growingdemands for local content in any oil or gas activity. For example, it is

quite common for the national authorities to ask that a certain percentage

of the workforce should come from their country or that their own yards

do much of the construction work.

You often get a project thats already high risk, and you have the added

problem of having to use people who you have not chosen, says Mr Jones.

Even without this distraction, the oil and gas business is already much

more complex logistically than it used to be. Whereas oil companies

would once have used their own resources to do the bulk of the

exploration and production work, they are now much more likely to use

contractors and subcontractors.

Its a very complicated scene, says Mr Jones. You could have lots of

firms from many different countries working on the same project. You need

to have very strong procedures in place to manage the supply chain.

Meanwhile, back in the more established oil and gas fields, existing units

are working to peak capacity to meet the worlds need for energy. And,

whenever commercial activity increases, so does the risk of something

going wrong.

This scenario of greater opportunity and risk asks all kinds of questions

of the oil industry: of its systems and procedures; its ability to

communicate; and whether it can continue to operate to the highest

practical health and safety standards.And it provides the backdrop for

what should be a lively discussion at the Forum.

Although he is going to set the scene and lead the debate, Mr Jones is

clear about one thing: he does not have all the answers.

BY MARK BAYLIS

CONSULTANT

+44 (0)20 7680 5603

[email protected]

Marcus Jones, Oil & Gas Director,

Lloyds Register

Marcus is responsible for the global Oil & Gas business at Lloyds

Register. His primary role is to lead the development and

implementation of the global strategy and planning. He is also

responsible for directing worldwide business development and the

definition of the commercial, technical and marketing policies for the

business.

Marcus joined Lloyds Register in 1990 as a basic grade engineer

surveyor, having previously worked in the merchant navy. He was

later appointed lead surveyor for onshore and offshore activities to

oil and gas clients such as Conoco, Arco and finally Shell, where he

was responsible for the offshore certification of 25 platforms.

Marcus is qualified as an Extra First Class Marine Engineer and is a

Fellow of the Institute of Marine Engineers.

Lloyds Register

Lloyds Register is an independent risk management and safety

assurance organisation. As well as being the oldest of the

classification societies, it provides a wide range of other services.

These include assisting clients with their safety, quality and

environmental performance.

Its expertise covers shipping and other forms of transportation, oil,

gas, as well as general industry and manufacturing, and

management systems. It is recognised as a world leader in the

provision of compliance services to the oil and gas industry.

With 240 offices in 80 countries, employing 6,000 people from 90

different nationalities, Lloyds Register will still bring a truly global

perspective to the debate.

Information about the seventh Standard Offshore Forum can be

found on the back cover.

MARCUS JONES

OIL AND GAS DIRECTOR, LLOYDS REGISTER

+44 (0)12 2426 7578

[email protected]

Regulatory
mailto:[email protected]:[email protected]:[email protected]:[email protected]


15/1615

versatile solutions for small to medium-sized fields. Both of their FPSOs,

which will be used to maximise production at the beginning and end of

field life, or on fields where larger permanent units are unsuitable, are

entered with Standard Asia.

Of course, the growing book of production units does not mean that

Standard Asia is no longer interested in other offshore business. We are

proud to insure fleets such as that of Emas Offshore, which is typical of

the new and energetic Singaporean companies taking up leading

positions in the oil and energy business. Emas young fleet of AHTs and

supply boats is used to provide support throughout the lifecycle of an

oilfield, and it too is moving into construction and production with theformation of a new division.

We believe that companies operating out of the Asia Pacific region will

increasingly be looking for local provision of their support services,

and Standard Asia is confident that we can offer insurance solutions

as flexible and innovative as the technological solutions our clients

are providing to the industry. From our Singapore office, we are able to

underwrite and service the business from cradle to grave, and through

products such as the Standard Offshore Conditions for FPSOs and the

Offshore Liability Extension for support units, we can give tailored cover

designed for our members particular needs. We also work closely with

our reinsurance colleagues in the London office to ensure that we are

making the best use of the insurance capacity available in the market.

And of course, our position in Singapore means that we are on hand

to provide claims services not just to Standard Asia members but also

to Standard Bermuda members working in the region. This is how

we believe we give our clients the best of both worlds insurances

locally sourced, underwritten and serviced but backed by global

security and expertise.

We have written elsewhere in this issue of the Bulletin about the

worldwide boom in the offshore oil and energy business.Asia is no

exception; new oil and gas discoveries in Asia and Australia are fuelling

regional expansion as companies scramble to support present and future

projects. Established operators and well-funded start-ups are ramping up

their fleets to service their oil company clients, and south-east Asian

shipyards are full of orders to build, convert and refurbish floating

production units, drilling rigs and support vessels.

Standard Asia, the Standard Clubs Singapore based P&I Club, is seeing a

similar expansion in its business. Ten years ago, the Standard Club

decided that Asian shipowners needed their own dedicated club basedand incorporated in the region. That led to the setting up of Standard

Asia, with the express intention of providing a full range of P&I functions

from a management base in Asia. During the decade since it was

founded as the first mainstream P&I club in the region, Standard Asia has

become a major player in the offshore energy market. A book of offshore

business which was dominated by fleets of supply boats in 1997,

has now expanded to provide full cover for FPSOs and jack-ups.

For Standard Asia, as for other companies based in Singapore, projects

such as Tanker Pacifics FPSO Raroa have now become almost routine.

The 53,287 gt FPSO is currently under conversion in Singapores Jurong

Shipyard, which is installing a turret, boilers and process facilities as well

as other renewal and life extension work.When the project is completed

next year, the FPSO will take up her station on New Zealands Maari field.

Standard Asia has been able to provide Tanker Pacific with an insurance

programme to cover the FPSO from the conversion through the

installation phases and onwards to operation on the field.

In the meantime, companies such as Rubicon Offshore International are

breaking new ground in production technology, producing flexible

Asia Offshore

BY WENDY NG,

CLAIMS DIRECTOR

+65 6221 1060

[email protected]


16/16

The Standard

The Offshore Syndicate

The Offshore Team

ROBERT DOREY

SYNDICATE HEAD

SHARMINI MURUGASON

SYNDICATE CLAIMS DIRECTOR

CLAIRE BEARDUNDERWRITER

JOHN CROUCHEROFFSHORE LEGAL EXECUTIVE

LAURA REILLY

DEPUTY UNDERWRITER

VERENA DI CARLI

DEPUTY UNDERWRITER

KELLY DAY

CLAIMS EXECUTIVE

FABIEN LEREDE

CLAIMS EXECUTIVE

ROBERT DRUMMOND

GENERAL MANAGER /

UNDERWRITER

WENDY NG

CLAIMS DIRECTOR

WILLIAM ROBINSON

UNDERWRITING TECHNICAL

DIRECTOR

BARBARA JENNINGS

DIRECTOR, OFFSHORE

BRIAN GLOVER

DIRECTOR OF CLAIMS

KIERON MOORE

SYNDICATE HEAD, D

Standard Offshore Forum

The seventh Standard Offshore Forum will be held this year on Tuesday 6November in London. The main topic this year will be an examination of

global risk management for the offshore industry, looking at the various

regulatory and operational issues that arise in different regions and how

these can best be managed.

The Club will also host an Offshore Forum in Singapore in December.

Both Forums provide an opportunity for shipowners involved in the

offshore oil and gas industry to meet and talk with their contractor and oil

company clients in an informal environment. They are open to shipowners

involved in the offshore industry, whether or not they are members of the

Standard Club, as well as to representatives of the marine contracting

and oil and gas industries.

Attendance is by invitation, so if you are interested

in joining us, please contact Barbara Jennings

([email protected])

on +44 (0)20 7522 7429.

You can see presentations and papers from previous Forums under

Features on the Standard Offshore website at www.standard-club.com.

Standard Asia

The information and commentary herein are not intended to amount to legal or technical advice to any person in general or about a specific case. Every effort is made to make them accurate and

up to date. However, no responsibility is assumed for their accuracy nor for the views or opinions expressed, nor for any consequence of or reliance on them. You are advised to seek specific legal

or technical advice from your usual advisers about any specific matter.

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