The Ministry of Environment and Natural Resources recently issued administrative guidelines setting out the minimum insurance requirements for companies undertaking oil and natural gas exploration and production, processing and refining. All regulated entities engaged in such activities must secure civil liability, environmental damage and – if applicable – well control insurance.

Environmental damage insurance includes, among other things, costs associated with:

  • emergency responses;
  • contaminant control; and
  • damage mitigation, characterisation, remediation and restoration.

The insured amounts vary depending on the activities to be undertaken, but are substantive. For instance, the minimum per event annual aggregate amount for civil liability and environmental damage when dealing with shallow water exploration and production is $500 million. For deep and ultra-deep waters, the minimum per event annual aggregate amount is $700 million. Well-control insurance coverage is based on the total number of investments to be made in the corresponding fields. In addition, specific insurance coverage is required for vessels.

Further, oil treatment and refining and natural gas processing activities require civil liability and environmental damages coverage for a minimum amount of $500 million dollars.

Different coverage may be agreed based on the probable maximum loss analysis of companies engaged in these activities.

The required insurance must be evidenced and registered with the environmental authorities before commencement of the relevant activities.

For further information on this topic please contact Carlos Ramos Miranda at Hogan Lovells BSTL by telephone (+52 55 5091 0000) or email (carlos.ramos@hoganlovells.com). The Hogan Lovells website can be accessed at www.hoganlovells.com

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