2
Three things OSV owners need to know when signing contracts with E&Ps Primila Edward, Former Legal Counsel for Petro-Vietnam discusses with IQPC Singapore In the world of offshore vessels, the livelihood of OSV owners is dependent on getting contracts from E&Ps. Such contracts guarantee a stable source of income, and can also lift the profile of an OSV owner in the industry to attract more work and contracts. Therefore, it’s understandable that OSV owners are excited at the prospect of getting contracts and agreements. However, Primila Edward, Former Legal Counsel for Petro-Vietnam believes owners often caught up in the moment and overlook important parts of the contract. “When OSV owners get a contract they're deliriously happy and they go off and sign these contracts in some euphoric state – sometimes without really looking at the full effect of their contracts,” she said. Ms Edward has twenty years of experience as a lawyer for the oil and gas industry where she has been advising E&P operators, OSV owners as well as contractors. She was also awarded the 2011 Shipping Lawyer of the Year (Malaysia) UK Corporate INTL Magazine. Ms Edward said that from her experience, the E&P and OSV owner relationship is not a level playing field. When dealing with global corporations like ExxonMobil, Shell, and BP, many OSV owners tend to put up with a lot of things in their contracts because they feel they can't negotiate. “In a way it's a bit tougher for OSV owners. They have to manage their risk even more, be more skillful and savvy when looking at their contracts,” said Ms Edward. She said there were several different ways OSV owners can make sure they are getting the most from their contracts. Payment Terms Financial risk is an obvious consideration in any contract. For OSV owners, this comes down to payment terms and conditions. Ms Edward said payment terms should be clear and that there should be some form of guarantee of payment. “This should come in the form of an LC or a parent company guarantee, or similar. Though of course some of the oil companies may feel they are very big and financially secure, therefore they don't need to give this. But there have been instances where even companies like ExxonMobil have been known to give a parent company guarantee.” A payment guarantee not only reduces OSV owners’ financial risk when dealing with E&Ps, but they are also helpful when dealing with banks and lenders. “If the banks see a guarantee from the charterer of your vessel towards payment, they get better terms with their banks and their interest rates could be lower,” explained Ms Edward. Insurance Coverage OSVs tend to operate in difficult and often dangerous environments, which is why a

OSV - 3 Things You Need To Know

Embed Size (px)

Citation preview

Three things OSV owners need to know when signing contracts with E&Ps Primila Edward, Former Legal Counsel for Petro-Vietnam discusses with IQPC Singapore In the world of offshore vessels, the livelihood of OSV owners is dependent on getting contracts from E&Ps. Such contracts guarantee a stable source of income, and can also lift the profile of an OSV owner in the industry to attract more work and contracts. Therefore, it’s understandable that OSV owners are excited at the prospect of getting contracts and agreements. However, Primila Edward, Former Legal Counsel for Petro-Vietnam believes owners often caught up in the moment and overlook important parts of the contract. “When OSV owners get a contract they're deliriously happy and they go off and sign these contracts in some euphoric state – sometimes without really looking at the full effect of their contracts,” she said. Ms Edward has twenty years of experience as a lawyer for the oil and gas industry where she has been advising E&P operators, OSV owners as well as contractors. She was also awarded the 2011 Shipping Lawyer of the Year (Malaysia) UK Corporate INTL Magazine. Ms Edward said that from her experience, the E&P and OSV owner relationship is not a level playing field. When dealing with global corporations like ExxonMobil, Shell, and BP, many OSV owners tend to put up with a lot of things in their contracts because they feel they can't negotiate. “In a way it's a bit tougher for OSV owners. They have to manage their risk even more, be more skillful and savvy when looking at their contracts,” said Ms Edward.

She said there were several different ways OSV owners can make sure they are getting the most from their contracts.

• Payment Terms

Financial risk is an obvious consideration in any contract. For OSV owners, this comes down to payment terms and conditions. Ms Edward said payment terms should be clear and that there should be some form of guarantee of payment. “This should come in the form of an LC or a parent company guarantee, or similar. Though of course some of the oil companies may feel they are very big and financially secure, therefore they don't need to give this. But there have been instances where even companies like ExxonMobil have been known to give a parent company guarantee.” A payment guarantee not only reduces OSV owners’ financial risk when dealing with E&Ps, but they are also helpful when dealing with banks and lenders. “If the banks see a guarantee from the charterer of your vessel towards payment, they get better terms with their banks and their interest rates could be lower,” explained Ms Edward.

• Insurance Coverage

OSVs tend to operate in difficult and often dangerous environments, which is why a

comprehensive insurance coverage is critical. Insurance should cover broad areas from external factors like dangerous weather, to even political risks. “For instance, in Nigeria or countries in say the Middle East. If OSV are operating in those areas, they have to ensure there's some coverage for political risk insurance,” said Ms Edward.

• Indemnity Clauses

Indemnity clauses should also be in place as the nature of the industry means the unimaginable can always happen. “In the Deep Water Horizon, there was a huge fire where the whole platform collapsed and sunk into the sea. And in these sorts of situations, if there is damage to and OSV’s assets caused by the negligence of the E&P operator, then you should have adequate clauses in your contract to cover that.” Ms Edward believes insurance shouldn’t be the domain of the legal team. Other stakeholders should be involved in this process to ensure comprehensive coverage. “These are issues that your operational people should be involved it. It's not just a legal [team] sitting down and thinking up all these bright ideas, they have to work closely with operational people and their commercial people to make sure that the contract is fully comprehensive.” Source: IQPC Singapore

Get exclusive insight from industry experts from across the globe at Offshore Support Vessels Technology 2013, taking place from the 9 – 12 June at Le Royal Meridien, Abu Dhabi, U.A.E.

Benefits of attending:

• Enhance the safety and security of your offshore assets and crew

• Learn about the latest technology advancements in the world of OSVs to improve the efficiency and effectiveness of your offshore survey, drilling, production, emergency response and logistics operations

• Gain exposure to international best practices to improve the HSE&Q ratings of your offshore programmes

• Meet and greet the region’s offshore operations industry

• Understand current OSV market trends and dynamics

• Network with key players from local government authorities and national and international oil and gas companies and build your business connections with industry leaders

• Discover the latest opportunities with the region’s offshore E&P programmes

For more information or to register, Tel : +971 4 363 2975, Email: [email protected], visit: www.osvinenergy.com