An MSA is a legal agreement between two parties that sets out the legal terms that apply to all work subsequently ordered by an operator and accepted by a contractor. MSAs are intentionally designed to be broad enough to cover any type of work that could be ordered (whether goods, services, or rentals), and possibly last forever with auto-renewal conditions. MSAs are therefore very effective, as the parties may only have to negotiate once upstream (less recourse to lawyers!) and after that, the parties can simply agree to work on a contractual basis – usually by placing work orders – knowing that the legal conditions are already in place. Compensation prevents everyone from pointing the finger at everyone, making defending the lawsuit more cost-effective. It also allows a service company to pass on the risk to its insurers. In drilling situations, compensation discourages the service company from making a counterclaim. The service provider transfers the risk to the operator. An oil and gas MSA can be a damning document with several different clauses. Here are six important tips to make sure your business interests are protected in the deal: For those who have worked in the oil and gas industry for a while, whether as a representative of an E&P company or a service provider, chances are you`ve heard of MSAs. MSAs (short for Master Service Agreements) are widely used in the industry and it is rare for a service provider to be approved for work by an operator without first having an MSA. Well out of control. Few contracts explicitly hold contractors responsible for eruptions; This is usually the responsibility of the operator.
But some contracts remain silent about well control or have ambiguous language that could leave a contractor open to claims. In these cases, the agreement must be amended to make it clear that the operator assumes responsibility for the control of the well. But again, we see that some operators are adding provisions that can hold contractors liable for damage caused by eruptions if the contractor is grossly negligent or causes the problem through intentional misconduct. Such a situation could affect a drunk employee of a well-maintaining contractor who caused a rash by placing the wrong sized blowout preventer on a well. This could make the contractor liable for the cost of controlling the well, drilling a new well, clearing debris and repairing damage, as well as a significant legal bill. Out-of-control wells are not covered by the standard liability policies available to energy companies. We are seeing an increasing number of contractors choosing to purchase an additional policy known as additional cost recovery from the prospective operator, so they don`t have to worry about an otherwise very harmful landmine. Contracts for oil and gas projects – known as service framework contracts, or MSAs – are designed to streamline operations and avoid litigation by clearly determining which parties are responsible for unavoidable accidents and injuries. Ask a contract lawyer to review the framework agreement before signing it, especially if you`ve never negotiated one before or if there`s a language you don`t understand. A lawyer can help you negotiate an agreement that protects your business interests. Compensation is essential for drilling and other oil projects where the risk of injury can be relatively high. Many indemnification clauses also address pollution and environmental damage caused by the Deepwater Horizon oil spill in 2010.
Before you take responsibility for what happens to your staff and equipment, assess the risk of your role in the project. Make sure your business has the right amount of liability insurance to cover this risk. Some MSAs even require contractors to provide insurance certificates to prove they are insured. The MSA also defines your company`s liability in the event of an accident. In the rapidly changing world of oil services, it`s tempting to take on new business with a handshake. However, it is in the best interest of your business and the oilfield operator to have a signed MSA filed. The alternative could be a trial for millions of dollars and financial ruin. The agreement specifies how the activity will be conducted on the site, but does not process specific orders. Key areas covered by an MSA include warranties, payment terms, liability insurance, and risk management. Many MSAs determine the duration of the contract, dispute resolution and termination. The agreement may also impose business practices such as inspections, site clean-up and payment record keeping. In some cases, the MSA may contain payment terms and restrictions that conflict with work orders and other contracts.
This may come back to haunt you as the MSA acts as a framework agreement compared to other agreements. Make sure the MSA doesn`t include any language that could limit your company`s ability to do work and make money from the project. A Master Service Agreement (MSA) is attractive because it allows the parties involved to quickly negotiate future transactions or agreements. The MSA provides a solid foundation for future activities, and conditions do not need to be renegotiated repeatedly; You only have to negotiate specific terms for the last transaction. A transcript of records is a provision included in service master contracts. This is a formal document that describes the specific work to be done by a service provider for a customer. It records the work activities, the results and the schedule of the work to be carried out. Above all, compensation receives a lot of attention in the oil field.
As a general rule, the parties agree either on a “blow for blow” compensation system or on a “negligent” compensation system. A “blow for blow” compensation system means that the parties are generally liable for their own employees and property (and the parties who belong to their group), regardless of their fault. In a “negligence-based” compensation structure, on the other hand, fault is essential in determining who is responsible for what. Make sure that the MSA language on your company accurately describes all the work you could potentially do for the project. For example, your company might be welding on a construction site and see the work extended to swabs or equipment rental. An MSA that does not include these other services can create a responsibility for your business. Negotiate an agreement that focuses on all the services in your business, not just those that are needed right now. MSAs will also generally “get out” of the general compensation system and separately address some issues related to high dollar exposure, such as. B: pollution, contamination, eruptions, wild wells, damage to wells or reservoirs, loss of minerals and seismic events. Regardless of the compensation scheme used in an MSA, it is important to understand that what can be contractually agreed may be limited by the extent permitted by law. For example, if something that has been contractually agreed violates “public order”.
Knowing these issues is another reason why it is crucial to have a lawyer experienced in negotiating MSAs for oil fields. If your company has never negotiated an MSA before, you should ask a lawyer to review the agreement. Even if you are familiar with MSAs, you may come across one with terms that are difficult to understand. Contact an expert to negotiate an advantageous agreement that protects your company`s interests. The service contract may also cover other points, such as .B. Corporate social responsibility, business ethics, access to networks or facilities, or other terms essential to any future agreement. Some of the common actions in compensation agreements are: A good service framework contract (MSA) saves time and headaches on a complex project. In the oil and gas industry, the MSA sets the terms of the contract between companies involved in exploration, drilling, production and service. The agreement outlines the risks and responsibilities between contractors and employees throughout the life of a project. This eliminates renegotiations and disputes when the work of the project changes. Most MSAs include a termination clause. It sets out what is expected of all parties and what constitutes a breach of contract.
Make sure language doesn`t cause your business to fail. Look for clauses that provide for automatic termination for work that has not been completed within a specific time frame. You don`t want the termination clause to be too specific or demanding. Less often, MSAs require contractors to purchase insurance that is not appropriate to the actual risks of the work they perform. We have seen contractors doing all-land work that need additional insurance to cover offshore risk, probably because the operator had used the same agreement for other offshore projects. These irrelevant provisions should be removed from the MSA or clearly marked as unenforceable in order to avoid a situation in which you could be considered a breach of contract. It is important that contractors work closely with an experienced broker to scan all of their MSAs for hidden landmines that could potentially hold them responsible for multi-million dollar losses. The MSA determines who is responsible in the event of injury to a worker or damage to equipment. Many MSAs contain indemnification or “indemnified” provisions in which the operator and contractors are responsible for what happens to their own employees. All parties agree not to take legal action against each other in the event of an injury or accident on the construction site. This clause is also known as mutual compensation or “blow for blow” provision.
The definition of a master service contract is relatively simple: it is a contract between two parties in which both parties agree on most of the terms that govern future transactions or future agreements. .