Examining Post-Macondo Trends in Risk Allocation: Implications for Oil and Gas Contracts

After the Deepwater Horizon disaster in 2010, the oil and gas industry had to make some big decisions. In my article, "Recent Trends in Allocation of Risk Post-Macondo: The Growing Tension Between Oil and Gas Standard Forms of Contract and Contractual Practice," I discuss the tough negotiations and risk sharing that followed this tragic event.

 

The story starts by recognising the huge risks involved in oil and gas operations, which go beyond finances to include human lives, property, and the environment. Traditional contract terms like indemnity and mutual hold harmless clauses have been important in dealing with these risks. However, after Macondo, there was much criticism about these terms being biased in favour of operators.

As the legal and regulatory issues from Macondo played out, a new way of doing contracts started to emerge. Operators, facing more pressure and liabilities, started trying to shift the risks to contractors. The standard model contracts became battlegrounds for negotiations, as operators tried to put more of the liability onto their counterparts.

Based on real legal battles and industry insights, I shed some light on the complexities and tensions surrounding these contract negotiations. From big legal fights to arguments over contract terms, the post-Macondo world was as tricky as the deep waters of the Gulf.

In the middle of all this, I argue for a fair approach to sharing risks that look out for everyone involved. Without set ways to share risks, contractors risk being taken advantage of, so we need tailored contracts and rules to keep things fair.

In conclusion, the story of how risks were shared after Macondo is a warning for the oil and gas industry. As people deal with the changing rules of how contracts work, they need to stay watchful, guided by ideas of fairness, honesty, and legal smarts. Only by making decisions based on these ideas can the industry hope to weather the storms that are coming.