The Parameters for Drafting Insurance and Indemnity Contractual Clauses as the Subset of Risk Allocation Provisions Outlined in the Main Types of Upstream Petroleum Contracts; the case study of IPC

Various hazards exist in the upstream oil and gas industry. Therefore, the contracting parties of any petroleum contract always try to reduce the inevitable economic burdens of occurring adverse events arising out of risks in the course of petroleum operation by applying legal approaches such as contractual risk allocation provisions, which can be realized by drafting efficient insurance and indemnity clauses as the subset of risk allocation provisions. Hence, this study addressed the main research question of “What are the necessary parameters for drafting the insurance and indemnity clauses in the main types of upstream petroleum contracts?” To achieve this end, the mentioned clauses stipulated in the main types of upstream petroleum contracts, have been examined; including concessions, production sharing, and service contracts of ۱۵ different countries around the world besides the comparative analysis with the new model of Iranian Petroleum Contract (IPC). Eventually, the hypothesis of this study stating “There should be several parameters such as liability towards risks, limitation of liability, exclusions/exemptions, etc. for drafting the insurance and indemnity clauses in these contracts” verified. That is the result and the answer to the research question. Moreover, the comparative analysis of the extracted set of parameters needed to draft these clauses legally, with the related ones in IPC has been done. Therefore, it led to the detection of the existing contractual shortcomings. Thereafter, the necessary suggestions to resolve them are offered, which can enhance the effectiveness of the upstream petroleum contracts and avoids potential litigation in this regard.

Keywords:

Upstream Petroleum Contracts , Insurance clause , Indemnity clause , Risk Allocation Provisions , Iranian Petroleum Contract (IPC)