Commission proposes new rules on the safety of offshore oil and gas activities
European Commission - MEMO/11/740 27/10/2011
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Brussels, 27 October 2011
Commission proposes new rules on the safety of offshore oil and gas activities
Why do we need a specific EU legislation?
Offshore accidents do not know borders. If a similar accident to the Gulf of Mexico were to happen in EU waters, this could have serious effects for the Member State concerned but also for neighbouring States. With the EU-level legislation the highest safety standards already followed in some Member States will be made mandatory everywhere across Europe. And currently the offshore industry in different Member States operates to different environmental, health and safety standards.
What is new in the Regulation?
The Regulation introduces clear rules for effective prevention and response of a major accident:
Is the Commission taking any other action, in addition to the proposed legislation?
In conjunction to this legislative proposal, the Commission is putting forward a proposal for the EU to accede to a Protocol of the Barcelona Convention that protects the Mediterranean against pollution from offshore exploration and exploitation activities (see IP/11/1261).
In addition, the Commission is finalising an electronic guidance document on waste law which will include a section clarifying that, in accordance with the European Court's jurisprudence, oil spills are considered as waste under the EU waste legislation, with the resulting "polluter pays" consequences for the management of such waste to the waste producer.
How is an improved safety standard guaranteed?
The regulation does not establish a check-list of minimum technical requirements. Such a list may become out-dated as the technology evolves or as offshore explorations and drillings moves into more challenging areas.
Instead, the regulation takes a goal-setting approach, focusing on what needs to be achieved in terms of safety for each particular installation or operation. This new approach will lead to a European risk assessment that upgrades continuously by taking into account new technology, new know-how and new risks.
Have you learnt from the Gulf of Mexico? Will new EU rules prevent what went wrong there?
One of the main lessons from the Gulf of Mexico is that safety is not primarily about the rules that have been created but about how rigorously they are followed.
In the case of the Deepwater Horizon rig, several failures coincided according to analyses available to date. It is already clear that the blowout Preventer (BOP) on the well failed when it was activated in an attempt to stop the flow of hydrocarbons. The new law will require that operators ensure that all hazards are assessed and controlled and that they are ready to mitigate the effects should these hazards nevertheless materialise.
Likewise, in the case of Deepwater Horizon, it took several months to design and drill a relief well to stop oil leaking into the sea water. The current legislative proposal has provisions for the submission of contingency plans by the oil and gas companies. These contingency plans should specify which equipment is available to contain and stop the flow of hydrocarbons from a well.
Another learning point from the Deepwater Horizon incident is the fact that critical changes in the design of the Macondo well were not assessed and reviewed by companies involved in the project. The new proposal will make sure that operators have procedures in place to assess these changes (e.g. in an installation or in the design of a well) and be able to minimise the risks.
Further investigation into the causes of the Deepwater Horizon accident are planned to be completed in 2012. They will be reviewed by the Commission and the safety rules will be updated, if necessary.
Have similar accidents happened in the EU?
Similar accidents in the EU are: Alexander Kielland in Norway (1980, platform capsized, 123 deaths), Piper Alpha in the UK (1988, platform exploded, 167 deaths). Investigations have shown that in the last 31 years (1979 – 2010), there have been at least seven other major disasters worldwide.
Apart from these accidents, there have been a large number of lesser incidents that could have escalated into a major accident if conditions had been different: Forties Alpha platform in the UK (2003, explosion as a result of a gas line rupture, no casualties) and the Gullfaks C platform in Norway (2010, well control lost, no casualties).
What is checked before approval to operate or explore is given?
The operator that intends to start offshore operation needs to submit a Major Hazard Report, i.e. a risk assessment of the operation to the competent authorities to ensure that the plans of operations, installations and equipment used are adequate. A major hazard report contains a risk assessment and factual information about the installation that is to be operated in particular conditions. The risk assessment also identifies critical components which are crucial for the safety of the installation.
The operator is also required to prepare an emergency response plan which is part of the Major Hazard Report before addressing the risks identified.
These plans have to take into account all relevant aspects, including technical details of operations and also local environmental and weather conditions.
No installation can be operated without these reports and competent authorities can request it to be updated at any time. Operator will have to submit the Major Hazard Report to the competent authority which will then asses the report and give its binding opinion. This is a pre-condition for operations to start or to continue. Operators have to submit updated reports at least every 5 years.
Who checks that all safety measures are in place?
Operators are responsible for the safety of their installations. The national Competent Authorities are the ones who have to check whether companies’ risk assessments and emergency plans are in order. They also perform inspections on site to see whether all the safety rules are followed.
All equipment which is relevant to the safety of an installation needs to be assessed by an independent third party. The independent verifier will also need to look in to the measures that the operator has established to ensure that the equipment and systems critical for safety are adequate and implemented. Findings on these safety measures verified by the independent third party must be made available to national competent authorities.
Who are the independent verifiers?
The verifiers are organisations independent from the operator or owner of the installation. Verification is done typically by companies which are also specialised in maritime transport safety. Approximately 10 companies in the EU already conduct safety assessments for ships which are requested under EU transport legislation (Regulation 391/209/EC).
The legislative proposal specifies requirements for third party verification prior to starting operations and also for continuous verification afterwards.
Independent verifiers do not check the safety of the operations. The operator and/or the owner of the installation is responsible for this, which will be in turn verified by the competent authority of the Member States.
Will there be penalties for non-compliance with the safety rules?
Yes. Member States will have to put in place an enforcement and penalty system.
Can an installation with a valid permit be closed if safety standards are not respected?
Yes. In case of serious breach of safety standards, an operator may be required by the competent authority to stop the drilling or production operations.
What happens in case of an accident?
The immediate response will come from the company working at the well or on the installation, which is required to have equipment and procedures ready on the offshore installation itself. The company will also start using the additional resources that are ready for deployment on shore.
Where it will not manage to regain control over the installation or well, the national emergency plans will be applied. The emergency plans prepared in advance cover both on-site and off-site response to make sure that all necessary equipment is available.
What is environmental and civil liability?
Environmental liability is the liability for damages to protected species and natural habitats, for water damage and for land damage.
Civil liability ('traditional liability') is the liability for costs incurred by individuals (or groups) as a consequence of the incident, typically loss of income in coastal communities (e.g. when tourism is affected) and local economies (e.g. when fishing is affected).
Civil liability remains within the responsibility of the Member States which would make sure that those affected by the accident are remedied for the damages.
Who will be liable for environmental damage caused?
The licence holder will be fully liable for environmental damages, whatever the costs. The financial capacity of the licence applicant will be assessed before the licence is awarded to ensure that their finances are sufficiently robust to cover intended operations. In addition, there are financial guarantees in certain Member States.
What kind of information will be made public?
Member States will have to make public the results of inspections. The Commission will publish reports on the safety of offshore operations in EU waters every two years.
Which EU countries undertake oil drilling?
Out of the nearly 1000 offshore installations operating in the EU, 486 are in the UK, 181 in the Netherlands, 61 in Denmark, 2 in Germany, 2 in Ireland, 123 in Italy, 4 in Spain, 2 in Greece, 7 in Romania, 1 in Bulgaria and 3 in Poland. Drilling operations have recently started in Cyprus. In Malta, offshore licences have been awarded. Some exploration wells have been drilled, but currently there are no offshore activities in Maltese waters.
How many oil platforms will be covered by new environmental liability rules when we extend the environmental liability to 370 km offshore?
By extending the geographical zone for water damage from the 12 nautical mile zone to the Exclusive Economic Zone, Member States (370 km) will ensure that all installations are covered. Previously, only installations in MS coastal waters were considered liable for water damage, which accounts for only a fraction of the total number of installations.
Are there rigs in European waters being as deep as Deepwater Horizons?
Out of the 12 European Economic Area (EEA) countries with offshore operations, only Norway reports to have operating offshore activities in water depths of up to 1,300 meters. However, many countries want to follow Norway's example: In the UK, to the west of the Shetlands, exploration is planned at depths of up to 1,600 meters, and near the Faroe Islands at a sea depth of 1,100 meters. Romania has awarded a licence for drilling in the Black sea, at a water depth of 1,000 meters.
In Libyan waters in the Mediterranean, wells were drilled at 1,500 meters and above, but drilling is also planned in water depth exceeding 2,000 meters. In Egypt, wells are planned in waters up to 2,700 meters.
Why does the depth matter?
As divers can only operate in a maximum depth of 200-250 meters, intervention in deeper waters in case of accidents become more difficult. In depths of 1000 meters, the pressure is such that even rescue work with remote control is difficult.
In addition, when drilling in deeper waters, the blowout preventer (BOP) on the well is positioned on the sea bed in stead of on the drilling installation itself, as is the case when drilling wells in shallower waters. As a result, maintenance and inspection of these BOP's will be more difficult.
A further complicating factor when drilling in deeper waters is that the drilling installations used are not standing on the sea-bed but are floating on the sea surface. This will require continuous positioning of the installation over the well or anchoring of the installation to the sea bed.
How much do offshore accidents cost in financial terms?
In the impact assessment performed prior to submission of the legislative proposal, it is estimated that the cost of a major accident in EU waters is in the range of €205 - €915 million per year. This range is based on accident statistics regarding wells and blow-outs and reported costs related to property damage and clean-up of oil spills.
Who will cover the costs of the new safety measures?
Industry has the primary responsibility for the safety of all of its operations and has to take care of the costs involved. Member States will have to cover the costs for the establishment of national competent authorities
When will the new requirements take effect?
The new requirements will be applicable to new installations and operations immediately after the adoption of the new Regulation by the Council and the European Parliament. Transitional periods of a maximum of two years are foreseen for existing installations.
The new rules could then enter into force in 2014 for existing production installations. For planned production installations there is a transition period of one year which means that the rules could apply from 2013 on. For non-production installation (e.g. drilling installations) there is a transition period for one year too, so the new rules could apply from 2013 on.