In the oil and gas industry, engineering contractors place a high degree of reliance on the legal contracts they have in place to protect them from financial ruin should a major disaster or accident occur. It appears that these legal contracts might not be worth the paper they are written on.
The aftermath of the Macondo well incident in the Gulf of Mexico in 2010 is showing that even supposedly watertight “hold harmless” agreements for gross negligence are being challenged in the US courts with two cases involving BP starting next month:
- One brought by Transocean (the owner of the drilling rig that sank) against BP.
- The other by BP for billions of dollars against Halliburton (who made the cement cap that failed on the well).
This emerging legal risk is a major shock to an industry that relies on specialist contractors with modest balance sheets (in comparison to the oil giants). With legal contracts under major challenge, specialist contractors and service companies in the oil and gas industry might be looking to the insurance industry to make up the shortfall—by providing even greater financial protection for negligence claims.
|This post was part of the special feature about What Risks Will Emerge in 2012? published January 24, 2012. The feature also covered emerging risks in these other fields:|
Power & Utilities
Supply Chain Interruption