Environmental Issues in Oil and Gas
Breakout Session # 213
Name Bob Dickson
Date June 19, 2010
Time 2:30 PM to 3:45 PM
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What is this thing called
SubSea Systems
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What is this thing called
SubSea Systems
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What is this thing called
SubSea Systems
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What is this thing called
SubSea Systems
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Contract Management Responsibilities
Subcontracts
Major POs (Major Subcontracts)
- RFP responsible in Tenders
- Approve Major Subcontracts
POs
- Advice and Consent in negotiations
- Subcontract standards and templates
(RFQ, QRL, PO text)
- Special Conditions to CoC
- Special Conditions to QRL
- Commercial Principles
Tender Support
Strategic Supply Chain Agreements
- Supply Agreement templates
- Advice and Consent for all Supply
Agreements
- Advice for negotiations
Contract
Management
- Negotiation support
- Training
Expert Support
Administrative Oversight; Commercial and FMC Global Integrity Responsibility
Disaster
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Disaster
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Disaster
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Liability?
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Risk, Risk, Risk!
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Liability Impacts
• Personal Libility for the loss of life and
personal injuries
• The loss of the Deepwater Horizon Rig
(estimated at $39B)
• Liability to the government for its
emergency response
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Liability Impacts
• Economic loss to private parties
• Economic loss for loss of production
• Pollution
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Liability Impacts
• Fines and Penalties for environmental
impact and violations
• Capital Flow restrictions and
Shareholder Loss of Value
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Liability Impacts
• Potential Civil Law Suites versus BP by
Shareholders and others.
• Damage to Public Reputation
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What is this thing called
SubSea Systems
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Warranty
• “The Guarantee period commences at
the issue of the Delivery Protocol and
expires twenty four (24) months
thereafter, or eighteen (18) months
from installation, whichever occurs
first”
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Warranty
18
Warranty
3 mos.
Design
9 mos.
Fabricate
1 mos
Test
24 Months
Customer Required Warranty
Timeline
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Bal = 11 mos
Install
Intellectual Property
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Intellectual Property
• Any IP that the Subcontractor brings to
the Contract is his.
• As it relates to the Contract Object it is
given to FMC, royalty free on a world
wide basis
• And may not be offered to our
competitors.
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Intellectual Property
• Any IP that FMC brings to the Contract
is the sole property of FMC
• No permission is granted to use it for
the Subcontractor’s product except
under the Contract
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Intellectual Property
• Any IP developed as a result of the
Contract, belongs to FMC.
• May not be used by the Subcontractor
except under the Contract.
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Defects
• “If Company decides that rectification
work for a defect which has been
discovered during the Guarantee
Period can not be performed during
the Guarantee Period, then
Contractor’s obligation to rememdy the
defect shall apply for a period of two
(2) years form the expiry of the
Guarantee Period .”
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Liability for Personal Injury
and Property Damage
• “Subcontractor agrees to indemnify, defend, and
hold harmless XXX, its affiliates, customer and
subcontractors of any tier from and against any and
all claims, losses, expenses… and causes of action
on account of disease or injury (including death) to
Subcontractor’s employees, agents, officers…..
arising out of the performance of this Contract and
whether or not occasioned by the sole, concurrent
or partial negligence, fault, contractual undertakings
or strict liability of XXX.”
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Pollution
• “Subcontractor shall use all reasonable endeavors
to perform the Work in a manner that will prevent
pollution and shall be liable for Subcontractor’s
Group disposal of all pollutant substances….
Furthermore, Subcontractor is liable for all costs of
control or removal of any and all debris caused by
Subcontractor Group and shall, defend, indemnify
and hold harmless XXX in this respect….
Subcontractor shall not be responsible for damage
to or loss of the hole or casing therein or of any
reservoir or for any cost of regaining control control
of a wild well…”
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Insurance
• The language of a certificate of
insurance does not control the terms of
an insurance policy or contract.
Endorsements to the actual policies
are necessary to cover this
requirement.
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Insurance
• Commercial General Liability $5M per occurrence.
• Automobile Liability - $1M per
occurrence
• Worker’s Compensation - $1M
each accident.
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Limitation of Liability
• No to a cap to liability that is
something like 50% of contract
value.
• Recommend that the overall cap
should not be less than 100% of
the subcontract value as an
absolute minimum.
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Liquidated Damages
Liability
• “Delay occurs if the Work is not contractually
completed in accordance with the milestones set out
in the Contract Schedule….if the Work is delayed in
relation to the milestones for which liquidated
damages apply, then Contractor wqill pay liquidated
damages to Company in accordance with the
provisions outlined in…” “The amount of liquidated
damages per milestone are as follows: i.)
Hardware Milestones: NOK 25000 per day per
item (approximately $5000 per day per item); ii.)
Documentation Milestones: NOK10000 per day;
iii.) Service Milestones: NOK 10000 per day.”
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Liquidated Damages
Liability
• “If Work is delayed in relation to the delivery or
milestone dates set forth in the Contract Schedule,
Contractor shall, without proof of loss, pay to XXX
as liquated damages 0.5% of the Contract Price per
day until delivery takes place… Contractor’s
cumulative liability for payment of liquidated
damages under this Article is limited to 15% of the
Contract Price.”
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Environmental Impact –
Contractual Issues.
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