How to Handle Risk in Subsea Contracts

Contracts used by marine contractors in the offshore installation industry are usually extensive and detailed, and can be associated with risk. In a breakfast seminar recently ClampOn and Schjødt showed us how to handle risk related to subsea contracts.

Published: 8 February 2013

At the end of January NCE Subsea arranged a breakfast seminar in cooperation with ClampOn and the law firm Schjødt. The theme was contracts related to the subsea oil and gas industry.

Contracts used by marine contractors in the offshore installation industry are often extensive and detailed. The contracts deals with complex projects and regulates obligation and economic risk between the parties.

Schjødt’s presentation covered the frequently used contract Norwegian Subsea Contract 05 (NSC 05) and an identification of contractual economic risks marine contractors are exposed to through the contract.

Problems of particular interest are late delivery of vessels, off-hire, variation orders (VO) and declined variation orders (DVO). Important factors are how to reduce own risk by focusing on back-to-back contracts. Other areas of interest such as seabed and weather conditions are also covered by NSC 05.

ClampOn is a Norwegian technology company producing ultrasonic intelligent sensors for the oil and gas industry. Their new stat of the art Corrosion-Erosion Monitoring System (Subsea CEM) is a product developed over the last 10 years, and will be their main product for the future.

Do not rush it!

ClampOn’s Subsea CEM system is a new design which is more complex and has more sophisticated engineering than earlier monitoring systems. Contract values on the new system can range between 5 and 30 million Norwegian Kroner. To be able to handle risk and possible changes throughout the projects ClampOn has a close focus on different clauses in the contracts.

They have met challenges regarding economical responsibilities defined, delivery capacities and reasons for buyer to terminate contracts.

ClampOn’s advice is;

  • Read all contract clauses carefully
  • Discuss any unclear phrases
  • Use check-lists during contract evaluation
  • Do not rush into a signing of a contract – use all the time necessary before signing

Presentations from the breakfast seminar are available for download from our web site. Please note that presentations are available in Norwegian only.

  • ClampOn presentation – Dag A. Aldal, CEO
  • Scjødt presentation – by lawyers Amund Bjøranger Tørum and Geir Fjelde Bjerga