FPSO Is a Vessel: Maritime Law Applies to Indemnity Contract

FPSO Is a Vessel

Maritime Law Applies to Indemnity Contract

By: Bryan O’Neill

Bw Offshore United States v. Tvt Offshore, 2015 U.S. Dist. LEXIS 153840; Civil Action No: 14-1052; c/w 14-2566 Section: "H"(5); (E.D. La. Nov. 13, 2015, Milazzo, J.)

            The status of a facility offshore is important as it determines whether substantive maritime law will apply or the law of the adjacent state will apply as surrogate federal law under the Outer Continental Shelf Lands Act. As indemnity contracts are commonly included in contracts for the exploration, development and production of the minerals on the Shelf, the viability of the agreement will rest on whether the contract it governed by maritime law or the law of the adjacent state. If the law of the adjacent state applies, then the Louisiana Oilfield Indemnity Act (LSA-R.S. 9:2780) voids the indemnity as well as additional assured provisions. If the facility is a vessel then under the analysis of Union Texas Petroleum Corp. v. PLT Eng'g, Inc., 895 F.2d 1043 (5th Cir. 1990), maritime law applies of its own force.In this case the parties disputed the status of the Floating Production Storage and Offloading Unit (FPSO) in a claim for indemnity by two parties, one which owned the facility (BW) and another (TVT) which contracted with a third party (Petrolis) to provide personnel to work on various facilities offshore. BW asserted that the facility is a vessel while TVT and Petrolis maintained it is an artificial island and thus the indemnity provisions were unenforceable under the Outer Continental Shelf Lands Act.The court listed many of the facilities characteristics as reasons why the facility is a vessel. The court noted that,“[i]t is "ship shaped" and built on the base of a converted oil tanker. It maintains a full marine crew and flies the flag of Bermuda. Importantly, it retains its own propulsion system and can detach itself from the well and relocate under its own power in as little as six hours. Though its primary purpose is oil production, this fact is not dispositive to its status as a vessel.”It distinguished the facility from a Spar which “are large oil production platforms that float on the ocean's surface but are moored to large anchors in the seabed.” The court further emphasized that FPSOs “are not only practically capable of maritime transport, but are imminently capable of such.” Again, highlighting that the FPSO is capable of detaching from the well and relocating under its own power within six hours. Movants argued the fact that the FPSO had not moved from its current location since 2009 indicate that it is not a vessel, but the court stated that this fact “is of no legal significance in this matter.”Therefore, under the PLT test, maritime law applies of its own force. The Motions for Summary Judgment by TVT and Petrolis were denied.