E&P Magazine Guest Article: Mitigating Casing Failure Problems

02/04/2014

A single joint of defective casing can cost an operator millions. Fortunately, there are steps an operator can take to mitigate this risk and maximize the chance for full compensation if the casing fails. An operator can protect itself by implementing procedures for purchasing, record keeping, and the inspection of casing.

Purchasing procedures

An operator may place an order by email or over the phone with a supplier, which then typically sends the operator an invoice containing one-sided “standard terms.” The seller’s terms often attempt to rely on provisions in the Uniform Commercial Code, the governing law in most states that permits a seller to disclaim warranties and limit the buyer’s remedies. Operators should avoid accepting one-sided terms by rejecting quotations and invoices that contain such provisions or, alternatively, responding with a purchase order that expressly rejects limits on warranties or damages and conditions the purchase on acceptance of the operator’s terms. In addition to one-sided seller terms, the seller may also dispute what casing qualities constitute a defect. To avoid such disputes, the astute operator should consider requiring the seller to:

  • Represent that all casing complies with recognized standards, in particular those provided by the American Petroleum Institute as well as any other special performance criteria specified by the operator;
  • Provide mill certificates from the casing’s manufacturer, which typically include a variety of specific representations including chemical composition and inspection results; and
  • Provide the results of any third-party inspections and testing of the casing. The third-party inspector may be liable to the operator if casing defects are not detected during the third party’s inspections.

Excerpted from E&P Magazine. To view full article, click here.

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