What is the purpose of The OPOL Agreement?

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

2: To encourage prompt remedial action by the parties.

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

4: To provide a mechanism for claims to be met up to the maximum liability limits specified in the OPOL Agreement.

5: To avoid complex jurisdictional issues relating to claims.

What does the OPOL Association do?

Annual Checks

The OPOL Agreement requires members to submit evidence of financial responsibility to the OPOL Association every year.

These must comprise any of the following:

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

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

• A guarantee, in the prescribed form, issued by a company meeting the credit or financial strength rating required by the OPOL Rules.

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

Evidence of financial responsibility must be provided for an amount of not less than US $250 million any one incident and US $500 million in the annual aggregate. It is recommended that new members seeking to satisfy their OPOL financial responsibility obligations by insurance, consult with their insurance brokers or insurers to ensure they have confirmed insurance coverage for OPOL liabilities endorsed onto their insurance policies and that the required certificates are issued to OPOL. Find out more about membership and providing evidence of financial responsibility.

Work with the Regulators and OEUK

The UK Offshore Licensing Authority (NSTA) has historically accepted membership of OPOL as evidence of financial capability to meet oil spill clean-up costs and third party legal liabilities.

Following the Deepwater Horizon (Macondo) blowout in the Gulf of Mexico in 2010, 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 OEUK, and the UK Offshore Environmental Regulator (OPRED), took part in a liability and indemnity workgroup. The report and recommendations from this group were approved by OPRED and form the basis of the ‘OGUK Liability Provision Guidelines for Offshore Petroleum Operations Issue 2 2020’ known as ‘The Liability Provision Guidelines’.

Under the Offshore Petroleum Licensing (Offshore Safety Directive) Regulations 2015 (‘the Licensing Regulations’), it is a condition 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.

In the UK, membership of OPOL remains an important cornerstone of a licensee’s evidence of financial capability to meet clean-up costs and legal liability to third parties, using the methodology set out in the Liability Provision Guidelines.