Contractual Risk Allocation in Petroleum Industry -“Knock-for-Knock” as a model
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Published
Apr 30, 2021
Abstract
Contracting parties under petroleum contracts profoundly seek to abandon common law’s position regarding the allocation of the risks. Under the common law, whoever violates a contractual obligation, or any specific legal obligation liable to the fault committed, and therefore the affected party must be compensated. However, this is not always the case within petroleum industry, where risks are related to the party who is able to control these risks. In this regard, the parties use the contract to reduce the probability of risk or control the consequences of such a risk. The arrangement is usually made between operator and contractor under oilfield service contracts or between the parties under the Joint Operating Agreement. This paper discusses the contractual risk allocation in the petroleum industry concerning the practice of “knock-for-knock”.
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Keywords
Petroleum industryRisk allocationIndemnityLiabilityJoint operating agreementOperatorContractorGross negligenceWillful misconductConsequential losses
References
أولًا: المراجع العربية
الكتب:
الدليمي، عامر علي سمير. المنازعات الدولية في عقود النفط وطرق تسويتها، ط 1، دار الأكاديميين للنشر والتوزيع، عمان، 2016.
التشريعات:
قانون الموجبات والعقود اللبناني، رقم 0، 9/3/1932، وتعديلاته اللاحقة.
قانون الموارد البترولية في المياه البحرية اللبنانيّة، رقم 132، 24/8/2010.
مرسوم متعلّق بدفتر الشروط الخاص بدورات التراخيص في المياه البحرية، ونموذج اتفاقية الاستكشاف والإنتاج في لبنان، رقم 43، 19/1/2017.
القانون المدني القطري، رقم 22، 2004.
ثانيًا: المراجع المرومنة
Al-Kutub:
Al-Dulaymyy, ʻĀmir ʻAly Samīr. al-Munāzaʻāta al-Dawlyah Fī ʻUqūd al-Nifṯ wa-ṯurq Taswiyatahā, (in Arabic), 1st ed., Sharikata Dāra al-Akādīmyyūna Lilnashr wa-al-tawzīʻ, ʻAmmān, 2016.
Al-Tashrīʻāt:
Decree no. 43/2017: Tender Protocol to Participate in Licensing Rounds and the Model Exploration and Production Agreement (in Arabic).
Law no. 132/2010: Offshore Petroleum Resources Law (in Arabic).
Qānūn al-Madanī al-Qaṯarī, (in Arabic), Raqam 22, 2004.
Qānūn al-Mūjibāt wa-al-ʻuqūd al-Lubnānī, (in Arabic), Raqam 0, 9/3/1932 wa-taʻdīlātih al-Lāẖiqah.
ثالثًا: المراجع الأجنبيّة
Books
Peter Roberts , Joint Operating Agreements: A Practical Guide (Globe law and business 2010).
Pereira E. G. and Zulhafiz W. M. (eds), Joint Operating Agreement: Applicability and Enforceability of Default Provisions (RMMLF 2018).
Talal Abdulla Al-Emadi, Joint Venture Agreements in the Qatari Gas Industry: A Theoretical and an Empirical Analysis (Springer 2019).
Articles
ALLEN and OVERY, ‘Guide to Extractive Industries Documents – Oil & Gas’ (2013) World Bank Institute Governance for Extractive Industries Programme 1.
Greg W Gordon, ‘Risk Allocation in Oil and Gas Contracts’, Oil and Gas law: Current Practice and Emerging Trends (Dundee University Press 2011).
JP Santopinto, ‘Knock-for-Knock Indemnities and their Application in Oil and Gas Contracts in Argentina’ (2014) 7 International In-house Counsel Journal 1.
Mathews C and Pereira EG, ‘Joint Operating Agreements: Understanding Different Interests and Concerns in the Wake of Reeder v. Wood County Energy’ (2017) 486 MarIus 73.
Mercier T, Kane J and Nammour S, ‘Drafting Canadian Oilfield Master Service Agreements: An Overview of Key Clauses and Market Trends’ (2014) 52 Alta. L. Rev. 245.
Peter Cameron , ‘Liability for Catastrophic Risk in the Oil and Gas Industry’ (2012) 6 International Energy Law Review 207.
Saraceni P and Summers N, ‘Reviewing Knock for Knock Indemnities: Risk Allocation in Maritime and Offshore Oil and Gas Contracts’ (2016) 30 Austl. & NZ Mar. LJ 28.
SC Styles, ‘Joint Operating Agreements’, Oil and Gas Law (Edinburgh University Press 2007).
WZ Zahari, ‘Unfair Contract Terms Act 1977: Does It Provide a Good Model in Regulating Risk Allocation Provisions in Oilfield Contracts in Malaysia?’ (2015) 8 Int. J. Trade and Global Markets 3.
Zulhafiz WM and Rahman N bin A, ‘Unfair Risk Allocation In Oil and Gas Upstream Service Contracts In Malaysia: The Necessity For Oilfield Anti-Indemnity Act’ (2020) 21 IJBS 177.
Zulhafiz WM, ‘A Comparative Analysis on the Enforceability of Knock-for-Knock Indemnities in Thailand and the United Kingdom’ (2017) 44 Journal of Malaysian and Comparative Law.
———, ‘On the Contractual Risk Allocation in Oil and Gas Projects’ [2017] The Law Review 168.
———, ‘Perception of Contractual Risk Allocation in the Oil and Gas Contracts in Malaysia’ (2018) 11 International Journal of Trade and Global Markets 127.
———, ‘Recent Trends in Allocation of Risk Post-Macondo: The Growing Tension Between Oil and Gas Standard Forms of Contract, and Contractual Practice’ [2017] International Energy Law Review 170.
Theses
DAV Smith, ‘The Enforceability of Indemnity Clauses for Oil Pollution Liability in Offshore Petroleum Contracts’ (Master’s Thesis, University of Oslo 2012).
Mielcarek P, ‘The Knock-for-Knock Agreements in the Offshore Sector under the United States and Norwegian Law: The Problem of Gross Negligence and Wilful Misconduct’ (Master’s Thesis, University of Oslo 2012).
Perivolaris AC, ‘Offshore Contract: Liability and Indemnity Regimes’ (Master’s Thesis, University of Oslo 2008).
Zulhafiz WM, ‘Unbalanced Indemnities : A Comparative Analysis of Risk Allocation in Oilfield Service Contracts in Malaysia, the UK and USA’ (Ph.D., University of Aberdeen 2016).
Cases
E. E. Caledonia Ltd v. Orbit Valve Co Europe Plc., [1994] 1 W.L.R. 221.
Environmental Systems Pty Ltd. v. Peerless Holdings Pty Ltd., [2008] V.S.C.A. 26 (26 February 2008).
Hadley & Anor v. Baxendale & Ors, [1854] 9 Exch 341.
In Re: Oil Spill by the Oil Rig "Deep Water Horizon" in the Golf of Mexico, [2012] Case 2:2010 MDL 2179-CJB-SS, Doc. 5446.
Red Sea Tankers Ltd & Others v. Papachristidis & Others “The Hellespont Ardent”, [1997] 2 Lloyd’s Rep. 547.
Wendell Reeder v. Wood County Energy LLC et al, 320 S.W. 3d 433 (Tex. App. – Tyler 2010) (“Reeder I”) 440 et seq.
Wendell Reeder v. Wood County Energy LLC et al., 395 S.W. 3d (Tex. 2012) (“Reeder II”) 789.
Standard Contracts
2012 Mutual Indemnity and Hold Harmless Deed.
LOGIC Standard Contracts for the U.K. Offshore Oil & Gas Industry, Marine Construction, 2nd Edition, Aberdeen, U.K., October, 2004.
Model Development & Production Sharing Agreement of 2002 Between the Government of Qatar and Contractor (North Field).
Electronic Sites
www.bimco.org
www.lpa.gov.lb
Others
May G and MacDonald K, ‘Pointing the Compass Toward Indemnities’ (2017) Sixth White Paperof the ‘Contracting Compass’ seminar series
الكتب:
الدليمي، عامر علي سمير. المنازعات الدولية في عقود النفط وطرق تسويتها، ط 1، دار الأكاديميين للنشر والتوزيع، عمان، 2016.
التشريعات:
قانون الموجبات والعقود اللبناني، رقم 0، 9/3/1932، وتعديلاته اللاحقة.
قانون الموارد البترولية في المياه البحرية اللبنانيّة، رقم 132، 24/8/2010.
مرسوم متعلّق بدفتر الشروط الخاص بدورات التراخيص في المياه البحرية، ونموذج اتفاقية الاستكشاف والإنتاج في لبنان، رقم 43، 19/1/2017.
القانون المدني القطري، رقم 22، 2004.
ثانيًا: المراجع المرومنة
Al-Kutub:
Al-Dulaymyy, ʻĀmir ʻAly Samīr. al-Munāzaʻāta al-Dawlyah Fī ʻUqūd al-Nifṯ wa-ṯurq Taswiyatahā, (in Arabic), 1st ed., Sharikata Dāra al-Akādīmyyūna Lilnashr wa-al-tawzīʻ, ʻAmmān, 2016.
Al-Tashrīʻāt:
Decree no. 43/2017: Tender Protocol to Participate in Licensing Rounds and the Model Exploration and Production Agreement (in Arabic).
Law no. 132/2010: Offshore Petroleum Resources Law (in Arabic).
Qānūn al-Madanī al-Qaṯarī, (in Arabic), Raqam 22, 2004.
Qānūn al-Mūjibāt wa-al-ʻuqūd al-Lubnānī, (in Arabic), Raqam 0, 9/3/1932 wa-taʻdīlātih al-Lāẖiqah.
ثالثًا: المراجع الأجنبيّة
Books
Peter Roberts , Joint Operating Agreements: A Practical Guide (Globe law and business 2010).
Pereira E. G. and Zulhafiz W. M. (eds), Joint Operating Agreement: Applicability and Enforceability of Default Provisions (RMMLF 2018).
Talal Abdulla Al-Emadi, Joint Venture Agreements in the Qatari Gas Industry: A Theoretical and an Empirical Analysis (Springer 2019).
Articles
ALLEN and OVERY, ‘Guide to Extractive Industries Documents – Oil & Gas’ (2013) World Bank Institute Governance for Extractive Industries Programme 1.
Greg W Gordon, ‘Risk Allocation in Oil and Gas Contracts’, Oil and Gas law: Current Practice and Emerging Trends (Dundee University Press 2011).
JP Santopinto, ‘Knock-for-Knock Indemnities and their Application in Oil and Gas Contracts in Argentina’ (2014) 7 International In-house Counsel Journal 1.
Mathews C and Pereira EG, ‘Joint Operating Agreements: Understanding Different Interests and Concerns in the Wake of Reeder v. Wood County Energy’ (2017) 486 MarIus 73.
Mercier T, Kane J and Nammour S, ‘Drafting Canadian Oilfield Master Service Agreements: An Overview of Key Clauses and Market Trends’ (2014) 52 Alta. L. Rev. 245.
Peter Cameron , ‘Liability for Catastrophic Risk in the Oil and Gas Industry’ (2012) 6 International Energy Law Review 207.
Saraceni P and Summers N, ‘Reviewing Knock for Knock Indemnities: Risk Allocation in Maritime and Offshore Oil and Gas Contracts’ (2016) 30 Austl. & NZ Mar. LJ 28.
SC Styles, ‘Joint Operating Agreements’, Oil and Gas Law (Edinburgh University Press 2007).
WZ Zahari, ‘Unfair Contract Terms Act 1977: Does It Provide a Good Model in Regulating Risk Allocation Provisions in Oilfield Contracts in Malaysia?’ (2015) 8 Int. J. Trade and Global Markets 3.
Zulhafiz WM and Rahman N bin A, ‘Unfair Risk Allocation In Oil and Gas Upstream Service Contracts In Malaysia: The Necessity For Oilfield Anti-Indemnity Act’ (2020) 21 IJBS 177.
Zulhafiz WM, ‘A Comparative Analysis on the Enforceability of Knock-for-Knock Indemnities in Thailand and the United Kingdom’ (2017) 44 Journal of Malaysian and Comparative Law.
———, ‘On the Contractual Risk Allocation in Oil and Gas Projects’ [2017] The Law Review 168.
———, ‘Perception of Contractual Risk Allocation in the Oil and Gas Contracts in Malaysia’ (2018) 11 International Journal of Trade and Global Markets 127.
———, ‘Recent Trends in Allocation of Risk Post-Macondo: The Growing Tension Between Oil and Gas Standard Forms of Contract, and Contractual Practice’ [2017] International Energy Law Review 170.
Theses
DAV Smith, ‘The Enforceability of Indemnity Clauses for Oil Pollution Liability in Offshore Petroleum Contracts’ (Master’s Thesis, University of Oslo 2012).
Mielcarek P, ‘The Knock-for-Knock Agreements in the Offshore Sector under the United States and Norwegian Law: The Problem of Gross Negligence and Wilful Misconduct’ (Master’s Thesis, University of Oslo 2012).
Perivolaris AC, ‘Offshore Contract: Liability and Indemnity Regimes’ (Master’s Thesis, University of Oslo 2008).
Zulhafiz WM, ‘Unbalanced Indemnities : A Comparative Analysis of Risk Allocation in Oilfield Service Contracts in Malaysia, the UK and USA’ (Ph.D., University of Aberdeen 2016).
Cases
E. E. Caledonia Ltd v. Orbit Valve Co Europe Plc., [1994] 1 W.L.R. 221.
Environmental Systems Pty Ltd. v. Peerless Holdings Pty Ltd., [2008] V.S.C.A. 26 (26 February 2008).
Hadley & Anor v. Baxendale & Ors, [1854] 9 Exch 341.
In Re: Oil Spill by the Oil Rig "Deep Water Horizon" in the Golf of Mexico, [2012] Case 2:2010 MDL 2179-CJB-SS, Doc. 5446.
Red Sea Tankers Ltd & Others v. Papachristidis & Others “The Hellespont Ardent”, [1997] 2 Lloyd’s Rep. 547.
Wendell Reeder v. Wood County Energy LLC et al, 320 S.W. 3d 433 (Tex. App. – Tyler 2010) (“Reeder I”) 440 et seq.
Wendell Reeder v. Wood County Energy LLC et al., 395 S.W. 3d (Tex. 2012) (“Reeder II”) 789.
Standard Contracts
2012 Mutual Indemnity and Hold Harmless Deed.
LOGIC Standard Contracts for the U.K. Offshore Oil & Gas Industry, Marine Construction, 2nd Edition, Aberdeen, U.K., October, 2004.
Model Development & Production Sharing Agreement of 2002 Between the Government of Qatar and Contractor (North Field).
Electronic Sites
www.bimco.org
www.lpa.gov.lb
Others
May G and MacDonald K, ‘Pointing the Compass Toward Indemnities’ (2017) Sixth White Paperof the ‘Contracting Compass’ seminar series
How to Cite
al-Masry, M. F., & Zahari, W. M. Z. W. (2021). Contractual Risk Allocation in Petroleum Industry -“Knock-for-Knock” as a model. International Review of Law, 9(2). https://doi.org/10.29117/irl.2020.0113
Section
Articles in Arabic