Control of Well Insurance

 Are You Adequately Covered For A Blowout?

Well Out Of Control Picture

 

What is Well Control Insurance?”

Well Control Insurance, also known as Control of Well Insurance, is an essential coverage for oil companies or businesses with an exploration and production exposure.  It’s offered under various policy names, including:

  • Cost of Control,
  • Operator’s Extra Expense,
  • Energy Exploration, and
  • Development Insurance.

“What Does Well Control Insurance Cover?” 

At Oil Patch Insurance (OPI) we customize our Well Control Insurance to meet your unique requirements. No matter who insures you, the following are some basics that should be included in your coverage:

The Cost of Well Control: These are expenses you may incur when using specialized services to cap or plug your well due to an above-ground or subsurface event. You should also be covered for costs for surface and subsurface services such as fire control, “snubbing” and “well kill.”

Contractor Controlling The Blowout

Redrilling or Restoration Expenses: Whether you choose to resume operations after the well is controlled, or plug and abandon it, your Well Control Insurance should cover the costs to restore the well bore, or replace the well via redrilling.  Please Note: Coverage may be limited based upon percentages of restoration or replacement, according to the condition and depth of the well prior to your loss.

Expensive Blowout Wild Well

Clean-up, Seepage and Pollution Expenses: Your Control of Well Insurance should cover third-party property damage that was incurred due to pollution from your well, or to prevent and contain substances from seeping above ground from your well. This coverage may also be included in your Commercial General Liabiity (CGL) or Umbrella Policy. Please Note: It will not cover sub-surface water or minerals that may have been damaged.

Rig burned down by Blowout

Miscellaneous Expenses:  Along with those events mentioned above, your Well Control Insurance should include coverage for expenses incurred due to evacuation, any work required to ensure your well is safe, and legal liability for another’s well that was damaged due to your loss.

Care, Custody & Control (CCC):  In the event of a blowout loss, your Control of Well Insurance should cover a third-party contractor’s on-site supplies, equipment (owned or rented), whether on the surface or in-hole.  Most CGL policies exclude this type coverage—However, OPI will ensure your Well Control Insurance includes CCC. Note: Most policies are limited to $500,000 or $1,000,000.

Contractor's Equipment Used to Control the Well

Contractor Equipment Replacement Costs: It’s important to note that some drilling contractors may transfer the liability for damage of their rig to your company, based on an “unsound location.”  This could even include the full replacement cost for the rig! OPI will include this coverage in your Well Control CCC Endorsement to ensure your business is totally protected.     

“How Does OPI Ensure We Have The Coverage Required?”

Based on the information above, and assuming you want to insure a 13,500’ well with a dry-hole expense totaling $3MM, we will anticipate and evaluate your insurance needs as follows:

Example 1.  In a worst-case scenario, (such as severe blowout loss) we will project the replacement cost of a complete well bore.  This may be $1MM to re-enter, fish, and sidetrack.  However, if this fails, the cost to replace/re-drill the well bore could cost upwards of $3MM (perhaps $3.5MM).  In this case, we would assume a limit of $4.5MM for well restoration or replacement to ensure you are fully covered.

Example 2.  If an incident requires difficult-to-estimate subsurface well-control efforts to regain control of the well (such as snubbing using Cudd, specialty services, Wild Well Control, or other specialized control services) we would assume that you need coverage for at least one to two times the dry-hole costs.  In this instance, you would need from $3MM to $6MM of coverage.

Example 3.  Seepage and Pollution (S & P) are issues for wells near populated regions, waterways, wildlife preserves, government lands, agricultural areas, or within the vicinity of the “public eye” (TV news, environmental groups, etc.).  Although you may have a limited amount of coverage for S & P under your CGL and Umbrella Policy, you would require at least $1MM to $2MM of additional coverage, (and perhaps more if the location of your well exacerbates this risk).

Additional Concerns:

Evacuation and Well-Safe Insurance:  Depending on the location of your well, evacuation and well-safe issues, we may add an additional $500,000 of insurance to ensure you are completely covered.

Care, Custody and Control (CCC) are considered to be additional to the basic Cost-of-Control Limit.  A 13,500’ well with a dry-hole expense totalling $3MM would require between $9MM and $13MM of insurance—or three times the Dry-Hole AFE (Authority For Expenditure).  If extraordinary losses are anticipated, the redrill loss expense could total over five times the dry-hole AFE.

OPI Has The Knowledge and Experience You Need To Cover All of Your Well Control Insurance Needs.

OPI and our associates have you covered when it comes to Well Control.  As a well-known, independent energy insurance specialty firm, we have written customized Well Control Insurance Policies for members of the Oklahoma Independent Petroleum Association (OIPA). We pride ourselves on tailoring policies to our clients’ unique requirements.

If needed, you may elect to opt for excess or umbrella insurance that will increase your coverage for situations where existing coverage isn’t adequate. Note: In some instances, a client contract will require that your Oil & Gas Company has certain levels of appropriate or umbrella insurance to perform work in The Oil Patch.

Get Your Control of Well Insurance Quote Today” text=”The policies we’ve provided our clients are cost-competitive, and designed to provide the best coverage possible. Unlike others, we understand that Well Control Insurance must be customized—Off-the-shelf policies are inadequate and could leave you exposed, without the insurance you need.  That’s why our clients trust us for the best, most comprehensive and individualized policies for Control of Well Insurance available today.

 

What To Do Now

We understand how hard it is to get the right insurance solution, so here's how we've made it easy and risk free.

1. You contact us, letting us know what you need.

2. We'll review your application to identify the best fit for your business.

3. We'll contact you to review your options and the next steps.

Why wait? Contact us now.

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