Media Centre
Wednesday 25 January 2012
New OPOL Rules are Focus of Event at Lloyd’s of London
The robustness of checks made to the financial responsibility of offshore oil and gas companies operating in the UK has been strengthened, The Offshore Pollution Liability Association Limited (OPOL) said today (25 January 2012) at a presentation at Lloyd’s of London organised by the Joint Rig Committee.
From 1 January 2012, in order to demonstrate financial responsibility to cover third party costs of an oil spill under the OPOL Agreement, operators are required to show that an identified credit ratings agency has assigned a qualifying rating to them or the company providing their insurance cover. A licence issued by the Department of Energy and Climate Change (DECC) to explore for or produce oil and gas is conditional on the operator being a member of OPOL.
Other changes in the rules governing the OPOL Agreement have also been introduced, these include that:
- Demonstration of financial responsibility can now only be achieved through insurance, guarantee or self-insurance (a surety bond is no longer acceptable)
- Members using insurance to cover the OPOL Agreement obligations must ensure that it is ring fenced and cannot be diminished to meet any other claim
- The deductible has been raised from $1m to $10m to better reflect current industry practice
Companies operating in the UK are responsible for the cost of remedial measures and pollution damage resulting from escapes or discharges of oil from offshore facilities. OPOL was established in 1975 by the UK oil and gas industry and provides assurance of companies’ financial responsibility to government. OPOL administers an industry mutual agreement which requires each operator to accept strict, ‘no fault’ liability for pollution damage and reimbursement of costs incurred by public authorities for remedial measures up to a limit of US$250 million per incident.
Niall Scott, managing director of OPOL, said: “The changes to the way that companies’ financial responsibility is demonstrated strengthens the assurance provided. The new method utilises ratings which are assigned following detailed, expert analysis by ratings agencies and is more readily understood.”
New members joining OPOL from 1 January 2012 must follow the new rules while existing members have six months, until 30 June, to demonstrate their financial responsibility in line with the new rules.
Ends
Notes to Editors
- More information on OPOL can be found at http://www.opol.org.uk/.
- To demonstrate financial responsibility to OPOL, members must have been assigned A- or higher from Standard & Poors, A- or higher from AM Best, A3 or higher from Moody's, A or higher from Fitch and/ or the equivalent from another internationally recognised credit rating agency acceptable to OPOL. An insurer must also meet a particular credit or financial strength rating standard.
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