This Clause is the same as Cl. 18-11 of the 1996 Plan, but with some editorial amendments in the 2013 Plan.
The provision establishes certain limitations to the cover, which are additional to the limitations in Cl. 12-3 to Cl. 12-5.
The provision concerns “loss of or damage to the drill string … whilst in the well or in the water”. Unless due to “external circumstances, for which the drilling contractor is liable under contractual conditions which are regarded as customary within the area concerned”.
“External circumstances” comprises typically fire, blow-out, cratering, lightning, explosions above the seabed, floods, tidal waves, ice, tornadoes, storms, cyclones, hurricanes, earthquakes or collisions. The underlying drilling contracts places the risk of such causes of damage with the owner of the MOU/the drilling contractor, while the licensees/operator cover other damage. Damage attributable to wear and tear, inadequate maintenance, etc, or to the fact that the drill string for other reasons cannot take the strain to which it is subjected during the performance of the work will in this context not be deemed as “external circumstances”. However, the term “external circumstances” also covers more ordinary heavy-weather damage than hurricanes, storms, etc., e.g. where high seas or difficult current conditions result in damage to or loss of the drill string. The term does not, however, cover the situation where the drill string is left in the well due to technical problems in retrieving it, or where the string gets jammed in connection with ordinary drilling. Nor do “external circumstances” comprise damage to the string as a result of negligence on the part of the drilling contractor, or someone for whom he is liable. However, if the direct cause of damage is fire, etc., and the fire is caused by negligence, the insurer will not be free from liability. Here the question of liability must be evaluated under the general rules in Chapter 3 relating to the duties of the assured.
The cover only extends to external circumstances for which the drilling contractor is liable according to customary contractual practice within the relevant area. If, for example, it is customary for the license operator to assume the risk in respect of damage caused by fire or explosion, this damage does not concern the insurer. In that event, it is irrelevant whether the drilling contractor under the relevant contract has accepted this risk if this is contrary to customary contractual practice.
The limitation applies to the drill string, as installed, including any of its component parts such as weights, stabilisers, thread connections etc.
Sub-clause (b) excludes from cover drill strings “left in the well for purposes other than drilling” if a decision is made to that effect by the persons who are responsible for the drilling operations. The provision does not apply to cases where attempts to retrieve the string from the hole are abandoned due to technical difficulties which this entails. In such cases the string shall be considered lost, and the loss is, as mentioned, excluded from cover according to sub-clause (a). The purpose of leaving the string must be that it is intended to serve as tubing for gas or oil produced from the hole. This means that it is no longer part of the drilling equipment, and it should for that reason no longer be covered. Effectively, this also follows from the principle stated under Cl. 18-3 (b) (in respect of mooring/anchoring system which is left behind for other use than the insured MOU): the drill string left behind no longer constitutes part of the “equipment” of the MOU.
The limitations in Cl. 18-19 to Cl. 18-21 apply in addition to the limitations in Cl. 18-22.