What is an MSA in oil and gas, and why does it control my insurance?

The Insurance Risk Management Institute (IRMI) describes a master service agreement as a contract oil and gas companies use "to enter into an agreement in advance with their contractors" setting the terms that will govern the contractor's work. IRMI notes it is typically used for on-site work done on a repetitive basis, such as equipment maintenance, well services and cementing.

The practical result: the MSA is signed once, often before any specific job exists. After that, the operator issues work orders, call-outs or purchase orders for individual jobs, and those jobs inherit the MSA's terms. If the MSA says you carry a certain limit and name the operator as an additional insured, that promise applies to every job until the MSA is replaced or terminated.

Texas law treats these contracts as a category of their own. Chapter 127 of the Civil Practice and Remedies Code applies to an "agreement pertaining to a well for oil, gas, or water or to a mine for a mineral," which covers written or oral agreements for well services, and also agreements for furnishing or renting equipment, incidental transportation and other goods and services connected to that work. Joint operating agreements between working interest owners are excluded.

An MSA can run dozens of pages, but a handful of sections decide what your policies have to do.

Section 127.003 voids an oilfield indemnity promise to the extent it covers the other party's own "sole or concurrent negligence," unless an exception applies. The big exception is Section 127.005: the chapter does not apply if the parties agree in writing that the indemnity "will be supported by liability insurance coverage to be furnished by the indemnitor." For a mutual indemnity, the obligation is limited to the coverage each party agreed to obtain for the other. For a one-way indemnity, the insurance required may not exceed $500,000.

A 2022 Fifth Circuit decision shows how literally this works. An operator and a well testing contractor signed an MSA with mutual indemnity and required the contractor to carry at least $1 million of general liability and $2 million of excess. The contractor actually carried a $10 million excess policy, but that policy limited coverage for parties it was obligated to insure by written contract to the lesser of its limits or the minimum the contract required. The court held the contractor owed indemnity only up to the $3 million minimum, and said the MSA set "the floor, but not the ceiling." If the operator had wanted more, "the parties could have so fashioned their agreement."

The lesson for you: the numbers in the insurance exhibit can define how much your indemnity is worth, in both directions. Our Texas oilfield anti-indemnity act page walks through the statute, and knock-for-knock indemnity covers the usual structure.

1. Read the indemnity and insurance sections together. One tells you what risk you took on. The other tells you how you are expected to pay for it.
2. Mark every endorsement the MSA asks for. Additional insured (ongoing and completed operations), waiver of subrogation, primary and non-contributory, notice of cancellation. Check each against your actual policy forms. See MSA insurance requirements.
3. Compare limits line by line. GL, auto, employers liability, umbrella, pollution. A short limit is a coverage fix, not a certificate fix.
4. Check the group definitions. If the operator's group includes co-owners and other contractors, your additional insured wording has to reach them.
5. Send it for review before you sign. Your attorney reviews the legal terms. We check whether your insurance actually delivers what the contract says it will, and flag what needs to change.