Oil and gas well operators (domestic and multinational) have their hands full managing day-to-day operations in sometimes remote and inhospitable locations, as demand for energy continues to grow.
Unforeseen accidents and incidents caused by equipment malfunction or failure can result in unnecessary downtime, disrupting work schedules which eventually cuts into profitability. This is where Operators Extra Expense (OEE) – Oil and Gas Insurance becomes essential. It is a specialized program that helps to mitigate the high costs associated with these risks.
What is Operators Extra Expense - Oil and Gas?
Operators Extra Expense (OEE) insurance is a specialized form of coverage designed to protect oil and gas operators from the financial impact of well control incidents. This commercial liability policy typically covers costs related to regaining control of a well, cleaning up pollution, and restoring damaged equipment. It plays a vital role in managing operational hazards associated with drilling and production.
Who Needs It
This coverage is essential for lease operators, drilling contractors, and energy service companies involved directly in well operations. Whether operating onshore or offshore, businesses that manage or own oil and gas wells face liability exposures that OEE insurance is specifically designed to address.
Companies with significant investments in oilfield equipment or those operating in remote or environmentally sensitive areas are especially at risk. For example, a sudden well blowout in a coastal drill site could lead to extensive property damage and environmental cleanup responsibilities.
What It Typically Covers
A standard OEE policy may include:
- Control of well expenses (e.g., regaining control after a blowout)
- Cleanup and containment of sudden pollution
- Redrilling or restoration costs
- Equipment damage or loss during well events
- Legal liability related to third-party property damage
In addition to this core coverage, some policies may offer endorsements for loss of production income or damage to leased assets.
Common Exclusions or Limitations
Operators Extra Expense policies often exclude losses caused by wear and tear, gradual pollution, or failure to follow industry best practices. Intentional acts, contractual liabilities, and certain offshore exposures may also be excluded without specific endorsements.
Factors That Influence Cost
Premiums for OEE insurance are based on multiple underwriting factors, including:
- Well depth and pressure
- Operator’s safety record and loss history
- Geographic location and environmental exposure
- Type of drilling (exploratory vs. production)
- Value of equipment and anticipated well output
Proof of Insurance & Compliance
Many jurisdictions and project partners require proof of well control insurance before operations commence. Holding an OEE policy not only demonstrates financial responsibility but also helps satisfy contract and regulatory obligations. It is also a key part of broader risk management planning.
How to Get a Quote
To find the right Operators Extra Expense policy for your operation, it's best to discuss with an agent who understands the unique risks of oil and gas exploration. An experienced broker can help tailor coverage to match your drilling activity, location, and operational scale.
In addition to OEE, oil and gas businesses may also benefit from complementary protections such as Oil and Gas Workers Compensation Insurance to cover employee injury exposures, and Drilling Contractors Insurance to address job-site hazards and commercial auto needs. For businesses operating well sites, Oil and Gas Lease Operators Insurance can offer added protection for equipment and facilities.
Frequently Asked Questions
What types of incidents does Operators Extra Expense insurance cover?
It typically covers well control events such as blowouts, sudden pollution, and related cleanup or restoration costs.
Can small operators or independent contractors purchase OEE coverage?
Yes, policies can be tailored for independent well operators or small drilling businesses depending on their risk profile.
Is OEE insurance required by law?
Requirements vary by region and project, but many contracts or permits require proof of well control coverage.
Does OEE insurance cover environmental pollution?
Most policies include coverage for sudden and accidental pollution but not for long-term or gradual contamination.
How is OEE different from general liability insurance?
OEE specifically covers costs related to well control and blowout recovery, which are not typically covered under general liability policies.
Still have questions? Talk to a local insurance expert.