What is the purpose of The OPOL Agreement?

1: To provide an orderly means for the expeditious settlement of claims arising out of an escape or discharge of oil from offshore exploration and production operations.

2: To encourage immediate remedial action by the parties.

3: To verify evidence of the financial responsibility (FR) of the parties to meet their obligations.

4: To provide a mechanism for claims to be met up to the maximum liability under OPOL.

5: To avoid complicated jurisdictional problems.

What does the OPOL Association do?

Annual Checks

Every year, The OPOL Agreement requires that all members submit evidence of financial responsibility to The OPOL Association.

These must comprise any of the following:

• A certificate, in the prescribed form issued by an insurer meeting the required credit strength rating, verifying insurance cover in accordance with The OPOL Rules.

• A certificate, in the prescribed form issued by an insurance broker, verifying insurance cover has been arranged in accordance with The OPOL Rules. (Insurers must meet the required credit strength rating.)

• A guarantee issued by a company with a financial or credit strength rating required by The OPOL Rules.

• Certification of qualification as a self-insurer provided by meeting the financial or credit strength rating required by The OPOL Rules.

Evidence of financial responsibility must be provided for an amount not less than US $250 million any one incident. It is recommended new members (whether to the sector or to the geography) seeking to satisfy their OPOL financial responsibility obligations by insurance, liaise with their insurance brokers or insurers to ensure they have confirmed insurance protection for OPOL liabilities endorsed onto their insurance policies and the required certificates issued to OPOL. Find out more about membership and providing evidence of financial responsibility.

Work with the regulators and OGUK

The UK Offshore Licensing Authority (OGA) has historically taken assurance of adequate financial competency to meet clean-up costs and third party legal liabilities from a licensee’s membership of OPOL.

In 2010, following the Deepwater Horizon (Macondo) blowout in the Gulf of Mexico, at the direction of the UK government, a task force was set up to review inter alia the liability regime regarding offshore exploration and production activities in UK waters.

Representatives of OPOL, together with the industry body OGUK, and the UK Offshore Environmental Regulator (OPRED), took part in a liability and indemnity workgroup. The report and recommendation from this group were approved by OPRED and form the basis of what is now the ‘OGUK Liability Provision Guidelines for Offshore Petroleum Operations Issue 2 2020’ known as ‘The Guidelines’.

Under the Licensing Regulations, it is a condition precedent to the award of a licence that the applicant has made adequate provision to cover liabilities deriving from the applicant’s offshore oil and gas operations and has provided evidence of such financial capacity.

In the UK, membership of OPOL remains an important cornerstone of a licensee’s evidence of financial responsibility and for most geographical areas of UK offshore activity, as set out in the Guidelines, is sufficient to evidence the licensee’s financial capacity to meet clean up costs and legal liability to third parties, using the determination method set out in the Guidelines.