IMCA standard FPSO contracting principles

 

Version history

June 2024 Rev. 0.1 – Page 2, template and bookmarking revised; no change to content Rev. 0.1

March 2017 – Initial publication

 

Summary

IMCA, the International Marine Contractors Association, is the international trade association representing offshore, marine and underwater engineering companies. It has several roles but a key one is communication and promoting dialogue amongst the various companies, both clients and contractors, for the benefit of the whole industry.

Contracting conditions around the world are complex and numerous. Often the risks and rewards have become imbalanced – a position which is not sustainable for the industry generally.

Offshore contracting is a high-risk activity and risk exposure can be very large and bear no relationship to contract value. The world of risk management has changed following a number of major incidents. Insurance companies and financial institutions have become more risk aware and as a result insurance has become more restrictive and expensive and clients are attempting to transfer increasing levels of risk to contractors.

In May 2011, IMCA LCIC002 – IMCA General Contracting Principles was published, followed by IMCA LCIC007 – Decommissioning Contracting Principles.

Another sector represented by IMCA is the floating production storage and offloading unit (FPSO) sector. Whilst the General Contracting Principles are broadly applied also in this sector, there are a number of contracting issues specific to this sector.

In this document, IMCA presents the FPSO Contracting Principles. Like IMCA’s other contracting principles, they are based on the FAIR approach.

FAIR, IMCA’s risk allocation goals are as follows:

Fair (not equal) and realistic distribution of risk in proportion to relative rewards

Allocation of risk – to the party best placed to assume

Insure – sufficient scope of cover

Reasonable – avoid ‘duplicate’ assumptions of risk and minimise potential for dispute.

IMCA believes these principles will serve the long-term interests of all participants in the oil and gas industry by encouraging an equitable contractual balance based on the parties’ respective risks and rewards. This, in turn will improve relations, increase efficiency and reduce overall costs.

The principles are not intended to represent a complete analysis of all risks which are covered by contracts in the oil and gas industry. In general, they reflect well established industry custom and practice of addressing certain risks such as the knock for knock indemnity regime.

In addition, the principles are not contractual clauses. They do not in any way form a standard contract nor is their adoption in any way mandatory. They are published as a discussion document and an aide for clients and contractors alongside their in-house standard contracts and industry published standard contracts. Each IMCA member is free to negotiate its own terms, qualify such contracts and to make use of the principles should it wish to do so in order to achieve a contract satisfactory to both parties.

IMCA is widely recognised for developing and publishing technical guidance which establishes industry good practice for many issues relating, for example, to safety and the environment. This good practice may become a contractual requirement if a client adopts it in a contract. Some clients look to IMCA membership, or compliance with IMCA guidelines, as a prequalification for tendering. (IMCA’s Competition Law Compliance Policy is attached as Appendix 1.)

 

Contents

• Introduction
• Finance
• Liabilities and Indemnities
• Overall Limit of Liability
• Insurance
• Delay and Liquidated Damages
• Variations and the Company’s Right to Instruct
• Relocation and Tie In (relevant only to L&O)
• Warranty (EPC(I))/Repair and Maintenance (L&O)
• Subcontracts
• Force Majeure
• Political Risks/War Risks (L&O)
• Acceptance (EPC(I) & L&O) and Payment (EPC(I))/Commencement of Hire (L&O)
• Off-hire, Shutdown and Penalties (relevant only to L&O)
• Importation
• Termination, Suspension and Step In
• Intellectual Property and Confidentiality
• Anti-Corruption
• Appendix 1 – IMCA Competition Law Compliance Policy (IMCA LCIC001)