2012

Removing wrecks within offshore oilfields raises a variety of specific risk factors that not only demand extensive engineering and offshore operations to be undertaken by the wreck removal contractor but also a comprehensive legal framework in which those operations are carried out.

Issues relating to wreck removal will normally only arise after all possible salvage efforts have been exhausted and the unit has been abandoned as a total loss.  Conventional wreck removals are generally carried out in order to comply with orders from local authorities. The vast majority of wreck removals within oilfields are required to fulfill contractual obligations under the agreement
with the employer of the unit – often being the field operator. As a result wreck removals within oilfields typically will need to be accomplished to the satisfaction of the field operator as well as being undertaken in compliance with any requirements from relevant authorities. 

INCREASED RISK

Many features of a conventional wreck removal will arise irrespective of where the casualty is located, but a wreck removal within an oilfield will usually involve increased risks due to the proximity to offshore installations, live pipelines, wells and vessels servicing these facilities. The need to address these risk factors specifically has been a significant factor in negotiating major wreck removal contracts that we have been involved in during recent years, such as the “West Atlas” in Australia and the “Jupiter 1” in the Gulf of Mexico.

CONTRACTOR AND CONTRACTING FORMAT

The international salvage companies dominate conventional wreck removals. The value of combining experience and resources from the offshore and salvage industries has however been demonstrated by the formation of several joint ventures consisting of offshore and salvage companies when tendering for and executing wreck removal projects within oilfields.

BIMCO has in co-operation with the International Group, the International Salvage Union and certain other members of the industry prepared three standard forms for wreck removals;

WRECKHIRE 2010, WRECKSTAGE 2010 and WRECKFIXED 2010

As the BIMCO forms provide an agreed framework generally suitable for wreck removals and are well known to both P&I Clubs and salvors, they often provide a good basis for projects to be executed within oilfields. The specific circumstances relating to wreck removals in offshore locations will normally require tailor made solutions – many of which will be drawn from drilling and other offshore service contracts.

REMUNERATION SCHEME

P&I Clubs generally prefer to use either of the lump sum agreements WRECKSTAGE 2010
or WRECKFIXED 2010 in order to get a firm estimate for their reserves, whilst the salvors normally wish to use the WRECKHIRE 2010 so that they can be remunerated for their work on a daily hire basis.  The traditional offshore service contracts will typically include a more differentiated remuneration scheme for various elements of the service provided. Features of a particular operation may justify a differentiated remuneration scheme or daily hire contracts but, in principle, it is possible to accomplish wreck removals within oilfields on the basis of fixed lump sum remuneration.

LIABILITIES AND INDEMNITIES

The BIMCO wreck removal forms contain a simple liability regime based on the “knock-for-knock” principle. This regulation is often inadequate for wreck removals within oilfields as the operations will not only involve the owner and the wreck removal contractor but also an interface with other parties involved in operations related to the exploration, construction and/or production activities in the field, including the oilfield operator. The simultaneous operation by several parties of high value assets in a restricted area under difficult weather and operating conditions is a risk scenario that is well known to the offshore industry. Offshore wreck removal contracts will there-fore often include the more extensive liability regime based on the “knock-for-knock” principle inspired by traditional offshore contracts.

The explosion of the “Deepwater Horizon” caused by a blow out on the Macondo field in 2010 is a reminder of the risks of pollution and environmental damage that arise for operations in close proximity to offshore installations and live wells. An attempt to regulate this pollution risk was included in the 2010 revision of the BIMCO wreck removal forms but specific issues related to the
operations within an oilfield may need to be addressed in any wreck removal contract.

REGULATORY AND INTERFACE ISSUES

Wreck removals within oilfields are carried out in close proximity to offshore installations or at least within the safety zones established around such installations and the contractor must comply with the relevant regulatory regimes established by relevant authorities or the operator of the oilfield.  These regulations normally impose requirements that are substantially in excess
to those affecting conventional wreck removals, such as particular surveys of the vessels or craft being used within the safety zones, safety cases for such vessels, observance of permit to work systems or similar requirements. The wreck removal contract will need to address the contractor’s compliance with such requirements as well as the associated risks of delays and non-compliance.

In complicated projects it may be prudent to specifically address issues related to simultaneous accomplishment of the wreck removal and other operations within the oilfield by executing a multi party agreement between the oilfield opera-tor, the owner of the unit, the wreck removal contractor and other contractors or service providers within the oilfield. Such agreements (often
referred to as mutual hold harmless or field indemnity agreements) will typically include an extensive liability regime based on the “knock-for-knock” principle with a particular regulation for pollution liabilities arising in relation to the wreck removal work and other mechanisms to mitigate interface risk. Establishing a firm liability regime directly between the involved
parties may curtail the possibility of future disputes.

A complicating issue in the wreck removal of the jack-up “West Atlas” from the Montara field off Australia was that the rig’s cantilever with drill floor had collapsed and was touching a well head platform in the field, making it necessary to carry out parts of the wreck removal work from that platform. The executing a mutual hold harmless agreement between the involved parties in
relation to this operation established a useful tool to deal with a variety of issues under a clear liability regime.