Explanatory Memorandum to COM(2011)688 - Safety of offshore oil and gas prospection, exploration and production activities

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dossier COM(2011)688 - Safety of offshore oil and gas prospection, exploration and production activities.
source COM(2011)688 EN
date 27-10-2011
1. CONTEXT OF THE PROPOSAL

Contents

1.

Grounds for and objectives of the Proposal


Oil and gas exploration and production is taking place increasingly offshore, also in complex geographical and geological environments such as deep waters. The scale and characteristics of recent offshore oil and gas accidents1 and near misses[2] reported worldwide, including the Union, demand action. They expose the disparity between the increasing complexity of operations and the inadequacies in the current risk-management practices. Amongst individual companies there are reported wide disparities in safety performance and attitudes. Moreover, the incidents have highlighted the challenges that regulators face in ensuring adequate oversight of offshore activities, and a lack of transparency and data sharing regarding the safety performance of the offshore industry.

In Europe, most oil and gas is produced offshore. A major accident at any one of Europe's offshore installations is likely to entail material losses, damage to the environment, the economy, local communities and society, while the lives and health of workers may be put at risk. The likelihood of a major accident in Union waters needs to be reduced.

Studies, stakeholder consultations and risk analyses conducted since 2010 have identified the main problems for the Union as:

1. The risk of a major offshore oil or gas accident occurring in Union waters is significant and the existing fragmented legislation and diverse regulatory and industry practices do not provide for all achievable reductions in the risks throughout the Union.

2. The existing regulatory framework and operating arrangements do not provide for the most effective emergency response to accidents wherever they occur in Union waters, and the liabilities for clean-up and conventional damages are not fully clear.

Therefore, the general objectives of this proposal are to (i) reduce the risks of a major accident in Union waters, and (ii) to limit the consequences should such an accident nonetheless occur.

2.

General context for a regulatory initiative


The Commission responded to the disaster in the Gulf of Mexico already last year by a gap analysis on offshore practices and the legislative framework in the Union and the subsequent Communication 'Facing the challenge of the safety of offshore oil and gas activities'2 (adopted in October 2010). It gave a first indication of areas for action in the Union.

There are considerable disparities and fragmentation amongst Member States' laws and practices applying to offshore activities (e.g. licensing, liability provisions, equipment safety standards, public transparency and information sharing). This reflects the virtual absence of international law instruments and gaps in relevant Union law.

Whereas some Member States have offshore regulatory systems considered world class, all have room for improvement. Importantly, the control of major hazard risks in the offshore industry needs to be raised to consistently high standards throughout the Union.

Based on frequency analysis of industry performance in Europe to date and on documented costs of past accidents, the estimated average annual economic losses and damage from offshore oil and gas accidents in the Union range from €205M to €915m. This range is used as the empirical basis of baseline risk in the impact assessment.

It is estimated that the benefits accruing to the Union and Member States significantly outweigh the costs of introducing higher standards. The greater part of any additional costs will be met by the industry, which will benefit from risk reduction. However, experience shows that robust regulation and clear liability are needed to bring about the culture change in industry that will deliver the reduction in risk this regulation intends to achieve.

The general objectives mentioned earlier are developed into four specific objectives:

1. Ensure a consistent use of best practices for major hazards control by oil and gas industry offshore operations potentially affecting Union waters or shores;

2. Implement best regulatory practices in all European jurisdictions with offshore oil and gas activities;

3. Strengthen Union's preparedness and response capacity to deal with emergencies potentially affecting Union citizens, economy or environment;

4. Improve and clarify existing Union liability and compensation provisions.

Based on Commission research and consultations with stakeholders, practical delivery measures are derived. In addition, policy options have been identified grouping the measures in different combinations and means of implementation. These policy options are described in Chapter 2.

3.

Existing Union law provisions in the area of the proposal


The Union has no sector specific offshore oil and gas legislation; however there is broader Union acquis that, often only partially, applies to the offshore sector. This proposal complements primarily the following pieces of Union legislation:

i. Environmental liability. Environmental Liability Directive (ELD) 2004/35/EC addresses liability for damages to the environment also in connection with offshore oil and gas. The operator of activities causing significant environmental damage to protected species, natural habitats or water is strictly liable to prevent and remedy the damage and to bear the full costs of it. This proposal aims to expand the current territorial applicability of ELD, currently limited to the coastal strip and territorial sea in relation to water damage to cover also all marine waters under the jurisdiction of the Member States.

ii. Environmental Impact Assessment: Directive 85/337/EEC3, as amended by Directives 97/11/EC4, 2003/35/EC[6] and 2009/31/EC5, on the assessment of the effects of certain public and private projects on the environment, has harmonised the principles of the environmental impact assessments of projects by introducing general minimum requirements. In addition, the UN/ECE Espoo Convention on EIA in a transboundary context, which is part of the environmental acquis, is relevant as regards the assessment of projects likely to have transboundary effects. Its application is, however, discretionary for some drilling operations.

iii. Waste law: Directive 2008/98/EC on waste (Waste Framework Directive). This Directive applies fully to oil spills, as upheld by the Court of Justice of the EU. Thus, oil escaping from an offshore installation is covered by the EU definition of waste, thus imposing the obligation to the polluter of cleaning up.

iv. Health and safety of workers at work: - Directive 92/91/EEC (complementing the Framework Directive 89/391/EEC) is the principal piece of Union legislation relevant for protection of offshore workers and working environment. This proposal reinforces the regime of the Directive 92/91/EEC to include, inter alia, environmental assessment, to require the risk assessment to be submitted to the regulator for consent, to establish notification scheme for well operations and to require independent verification of critical risk control elements.

v. Major hazards: The Seveso Directive 96/82/EC does not apply to the offshore sector but some of its elements served as a good practice example for this proposal. However this proposal goes beyond Seveso, notably in requiring regulator's consent for risk assessment, stronger verification of technical and financial capability at licensing stages or provisions for evacuation escape and rescue of workforce.

v. Granting hydrocarbon prospection, exploration and production authorisations: Directive 94/22/EC is a principal legal framework for granting licences for exploration and production. This proposal does not change the Directive itself but strengthens obligations of relevant authorities during the licensing process in order to improve assessment of technical and financial capacity of the applicants.

vi. Emergency response: The proposal introduces new requirements on emergency response for the Member States and the industry to be complemented by existing Union capacities both inside and outside the Union. The EU Civil Protection Mechanism (Council Decision 2007/779/EC), the Monitoring and Information Centre (MIC)[8] and the European Maritime Safety Agency6 (EMSA) are principal Union tools for emergency response. Steps were already taken to expand EMSA's competence to cover also accidents of offshore installation (beyond its primary focus on maritime shipping).

4.

Consistency with other policies and objectives of the Union


This regulation is consistent with the Energy Strategy for 20207, viz Priority 3, the element for sustainable, secure and competitive energy in Europe.

In addition, this regulation is consistent with the Union's environmental legislation and policy and its main tenets such as pollution prevention, control and the polluter pays and precautionary principles. It is fully coherent also with marine policy, notably the goal of achieving by 2020 the Good Environmental Status of the marine environment (Marine Strategy Framework Directive 2008/56/EC).

5.

2. RESULTS OF CONSULTATION WITH INTERESTED PARTIES IN THE REGULATION, AND THE IMPACT ASSESSMENTS OF POLICY OPTIONS


Consultation of interested parties

An on-line public consultation was carried out between 16 March and 20 May 2011 to ascertain the views of interested parties on the need for Union action in various policy fields.

6.

The Commission received a total of 64 contributions, encompassing well over 350 disaggregated replies from stakeholders


Summary of responses and how they have been taken into account

The consultation produced broad support for tightening measures for prevention of, and responding to, offshore major incidents, however, the means to this end varied. National authorities in the North Sea Region felt that changes at Union level should not put in question their current goal setting regulatory approaches, which the proposal indeed intends to promote. While acknowledging improvement needs in general terms, the industry was the most conservative towards regulatory changes while preferring goal setting approaches and industry initiatives. On the other hand NGOs and the specialised companies (e.g. classification societies) were the most active in calling for changes at Union level).

The main aspects were as follows.

7.

Authorisations


Licensees should be held liable for any damages they cause. Most national regulators and industry consider the licensing and permitting currently applied in certain Member States sound but that the Union should work with others to improve their standards. They feel that decisions on awards must remain exclusively with the Member State concerned, however, information could be shared with neighbouring states where there is potential for transboundary pollution. Various recommendations were made by individual companies (e.g. harmonising and simplifying authorisation procedures and separating regulators for licensing and safety. Some NGOs and citizens are in favour of obligatory consultation or consent of a neighbouring state in case of cross-border pollution potential.

The legislative instrument foresees stronger and risk based assessment of technical and financial capacity. It introduces also environmental element in the control and prevention of major hazards in addition to the safety element.

8.

Prevention of accidents


The industry needs to be challenged to do even better in major incident prevention, whilst not risking a reduction in accident prevention standards where Member States already have a strong offshore regulatory regime. Industry maintains generally that it can improve the situation by self regulation and industry initiatives. NGOs and, to varying degrees, some regulators feel that existing regulations should be strengthened and extended to cover all offshore operations in Union waters.

9.

Verification of compliance and liability for damages


High levels of compliance with robust and sensible requirements are essential. Whereas industry argues that compliance is always a high corporate priority, many stakeholders see an overarching need to adopt a stronger safety culture across the industry. Compliance and the achievement of a reliable and strong safety culture are addressed in the regulation.

Stronger physical inspections were called for by NGOs and some classification societies. National regulators and industry were generally opposed to this citing potential resource shortages or risks of destabilising current systems. Requirements for independent third party verifications received some support also among the two latter groups.

Extension of the scope of environmental liability was most favoured by NGOs while the regulators and the industry did not take clear positions... Industry and insurers tended to be against changes such as obligatory insurance without capping liability internationally while the NGOs would strongly require it.

10.

Transparency, sharing of information and state-of-the-art practices


NGOs first but also industry and regulators felt that a higher level of transparency would enable the industry and public authorities to demonstrate that offshore oil and gas activities are appropriately managed and controlled. All National Authorities should work closely together, building on the example set by the North Sea Offshore Authorities Forum (NSOAF) and the informal meetings of the EU-NSOAF group.

11.

Emergency response


Emergency response is the primary responsibility of the operator and the Member State concerned, but the effectiveness and efficiency of oil spill response capacities existing in Europe can be further enhanced by cooperation and sharing of expertise and other assets. EMSA have a role in clean-up if requested via the EU Civil Protection Mechanism by the Member States concerned.

12.

International activities


Union based companies should endeavour, and are expected, to follow the policies outlined in this regualtion and not lower standards when operating outside the Union

Collection and use of expertise

Engagement with international and Union stakeholders (offshore industry, NGOs) and Member States representing, regulating or administering the offshore sector began in April 2010, culminating in the October 2010 Communication.

Both written and meeting-based stakeholder consultations have been expanded further since then. Apart from the public consultation, national regulatory/supervisory authorities have met on eight occasions hosted jointly by the Commission and the NSOAF. Offshore safety has been raised also in the meetings of the Berlin Forum Indigenous Fossil Fuels Working Group8. In addition, numerous meetings have taken place with international and national industry associations, individual enterprises, NGOs and independent verification companies and insurers. Furthermore, the Commission has regularly attended national (e.g. the Oil Spill Prevention and Response Advisory Group in the UK) and international initiatives (e.g. GMEP working group in G-20). These meetings have been maintained until the present time. Similarly, other Commission services (e.g. JRC) with relevant transferrable experience and expertise have been consulted on a continuous basis. Two national experts were hired by the Commission from national offshore safety authorities. The expert inputs have been fully considered in the formulation of this Regulation.

13.

Policy options and assessment of their impacts


Distinct policy options are derived from the general and specific objectives described in Chapter 1. There are four policy options in addition to the do-nothing baseline option (option 0) as follows.

Option 0 would preserve the status quo.

It has no additional cost nor impact on the baseline cost range €205-915m.

Option 1 ("North Sea basic") is the basic level for meaningful Union intervention. It introduces in Union law the Major Hazards Report (MHR) based upon the safety and health document required by Directive 92/91/EC but goes further in requiring the regulator to be satisfied with it prior to starting operations. An inspections and penalties regime would be required to underpin the measures described in the MHR. Option 1 would be implemented through new law.

Option 1 introduces additional running costs on industry of ca €36m/year and a reduction in risk expressed against the baseline cost at ca €7 – 30m/yr, an average 3% decrease in baseline risk.

Option 1+ ("North Sea +") goes further by introducing soft law guidelines for: tightening consideration of the technical capacity of applicants for offshore oil and gas licenses; converging national emergency response plans; developing compatible national and industry owned response assets and making them available to other countries at need; and clarifying the scope of the environmental provisions relevant to the liability of operators (e.g. applicability of waste legislation) as regards the offshore oil and gas accident . The Union would propose to Union based companies voluntary agreements on using EU standards beyond EU waters.

Option 1+ introduces additional running costs on Member States of ca. €3m and compliance costs on industry (cumulative with option 1) of ca €52m. The cumulative effect of Options 1 and 1+ is €25 - €109m/yr, an average 12% reduction in baseline risk.

Option 2 ("Union Best practice") develops further the reforms of option 1+ in a comprehensive package. Recognised global best practice in major hazard risk control would be mandated, and environmental risk assessment would be incorporated into the MHR. Also, best regulatory practice and required organisational standards would be introduced in arrangements for national competent authorities. This holistic risk assessment for safety and environment, would integrate emergency preparedness and response inventory management into law. A Union-wide Offshore Authorities Group would be created and the Licensing and ELD directives reinforced by regulation.

Option 2 introduces cumulative operating costs on industry of ca €122m (from €52m) and ca €12-18m (from €3m) on Member States, plus one-off administration costs of ca €18-€44m. The costs for the Commission to establish and run the EUOAG would be ca €1m. The additional measures cuts the baseline risk costs by between €103 – 455m/year - a 50% reduction in baseline risk.

Option 3 ("EU Agency") further reinforces the impact of Option 2 by introducing an Union agency to institutionalise and thereby consolidate the reforms achieved by option 2. It would undertake inspections and investigations, monitor and enforce consistency in performance, develop intervention capacity and assist capacity building in adjacent non Union countries.

Option 3 introduces cumulative annual running costs on the Commission of ca. €35m/yr (from €1m) and €18-44m one-off start-up costs plus €10's million for purchase of essential response assets. There would be no further costs to industry.

14.

The options are compared for the extent to which they address the measures in Table 1


No.| Measure| Option Option Option 1+| Option Option 3

Detailed verification of the technical capacity of potential operator| G| L| Union

Establishing regular inspections and a penalties regime| L| L| L| Union

Submission of formal safety assessments for acceptance by the regulator| L| L| L| Union

Extension of MHR into a comprehensive risk management model| L| L

Extending Union practices to overseas operations| G| G| Union

Establishing a Competent Authority| L| Union

Establishing a platform for regulatory dialogue| L| Union

Comprehensive information sharing and transparency| L| L

Preparedness for effective emergency response to major offshore accidents| G| L| Union

Ensuring cross-border availability and compatibility of intervention assets| G| L| Union

Clarifying the scope of environmental liability| G| L| L

15.

Table 1


0 = not implemented in this option; G = guidelines/soft law; L = law; Union = Union agency responsible

A measure can be implemented by different means, often offering a trade-off between effectiveness and practicality. As result, each of the policy options is characterized on one hand by the set of measures retained in the option and by the preferred implementation means for each measure under that option.

The preferred policy option is Option 2, i.e. a comprehensive offshore reform raising throughout Union, through new law, the level of risk management and emergency preparedness in the offshore industry. Apart from consistency, this option provides for greater transparency of industry and regulator performance.

This option can reduce the baseline risk by 50% through enhanced prevention and mitigation should an incident nonetheless occur. The risk reduction in average monetary terms (ca. €103m - 455m/year) compares favourably with the estimated cumulative costs of its implementation (€134 – 140m/year). It is more affordable administratively and economically as the additional running costs of Option 3 (ca €34M p.a.) fail to bring corresponding decrease in risks. Option 1+ is a choice with modest positive impact (12%) and enforcement possibilities while the benefits of Option 1 are insufficient to justify the (albeit small) costs.

16.

3. LEGAL ELEMENTS OF THE REGULATION


The proposed regulation creates duties for operators, Member States and the Commission as follows.

17.

Operator


The Operator is to organise his activities around a best practice model; prepare a major hazards report (MHR) and to submit this to the competent authority for assessment. In addition the Operator is to submit a notification for each well operation to the regulator. For both MHR's and well notifications, independent verification of the safety critical elements is required. Operators will prepare internal emergency response plans; promote interoperability and compatibility of response assets and report incidents and other specified information to the relevant Member State in a standard format. Union-based major companies would commit to demonstrating Union offshore safety standards wherever they work overseas.

18.

Member States


Member States licensing authorities would assess in an appropriate manner the potential safety and environmental performance (and financial capacity to deal with safety failures) of applicants when considering awards for exploration or production licenses. Member States would establish competent authorities for supervision of safety, environmental protection and emergency preparedness and introduce robust standards for inspection and investigation, underpinned with appropriate penalties for breaches of duty by operators. Member States will make information routinely available concerning their offshore sectors, and report all major incidents and lessons learned to the Commission. External emergency response plans would be prepared by Member States, collaborative with adjacent MS. Measures will be taken to ensure interoperability of expertise and physical assets to support cross Union intervention including by EMSA. Member States and the industry will prepare and periodically test emergency response plans...

19.

Commission


The Commission is to establish an EU Offshore Authorities Group with representatives from the competent authorities responsible for offshore oil and gas activities in Union Member States. The Commission is to amend Environmental Liability Directive (2004/35/EC) within the regulation.

20.

Legal basis


The draft Regulation is based on TFEU Article(s) 192 (Environment) for its environmental protection purposes and 194 (Energy) for minimising adverse effects on Union security of energy supply and the functioning of the internal energy market.

21.

Subsidiarity principle


Union action has been considered only where it can achieve the objective more effectively than the Member States or where actions by Member States alone may not deliver optimal improvements.

Companies operate and drilling rigs like Deepwater Horizon are being moved across borders but face very different regulatory regimes along the lines of national jurisdictions. Recent reactions of the Member States suggest, that without Union action these differences are going to exacerbate as countries mainly only in the most advanced regions individually plan improvements while international initiatives make very slow progress. Moreover, without Union action, existing difficulties for comparing industry performance and sharing of intelligence and incident data will remain.

Action by Member States alone would be inadequate to achieve consistent protection (including liability for pollution) of the environment, a common good, a commitment of the Union and its Member States as per the Marine Strategy Framework Directive.

The likelihood and consequences of major offshore incidents remain significant everywhere in the Union based on national reports, and risk analysis conducted by the Commission in 2011. Offshore production occurs increasingly also in the Mediterranean, the Black and even the Baltic Seas where some countries in some of these marine regions have less experience in regulating offshore operations. Still, even in the advanced regions (mainly North Sea) national action has failed to achieve common standards and comparability of data.

Overall, despite the measures already foreseen by Union legislation, such as in the field of health and safety at work, a failure to take action at Union level is likely to deprive Member States of the most suitable means to reduce risks of major offshore major incidents in a consistent and timely manner.

22.

Proportionality principle


Article 5 of the Treaty requires 'Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty'. In achieving the requisite balance between the objectives and the means proposed to achieve them this Regulation takes into account:

i. The costs from the Deepwater Horizon incident were estimated by BP to be in excess of $40bn; costs of a similar event in Union waters could be of this magnitude

23.

ii. Incidents of the magnitude of Deepwater Horizon occur in the offshore industry at a frequency of decades which is high for extreme major accident hazards


iii. The value of the Union offshore sector is very high in terms of national economies (revenues and employment) and its contribution to security of supply

iv. The offshore sector generates relatively high revenues for the companies involved

v. The public has developed an aversion to further major incidents risks

The cost of the measures proposed in this regulation (ca €134-140m/year) is modest in comparison to the risk reduction they will secure (ca €103 – 455m/year). Therefore they are proposed as enabling measures.

24.

Choice of instrument


A Regulation is proposed to implement Option 2. It has advantages over a Directive due to its clarity, consistency and speed of implementation through direct application9. By acting directly on the industry, the Regulation would also provide for a more level playing field. It would also cater well for emergency planning to combat transboundary pollution.

With regard to the interinstitutional agreements concerning the Commission advisory and expert groups, the EU Offshore Authorities Group should be established by a standalone Commission Decision.

25.

4. BUDGETARY IMPLICATION


The budgetary implication of the proposal is approx 2.5 m€ in the period 2013-2016, including compensations for committee participation. EMSA's assistance is primarily related to a) use of its satellite surveillance system which is active regardless of offshore accidents b) use of emergency vessels organised by EMSA. The emergency vessels are only contracted for the purpose and the operational costs are covered by the affected coastal State that requests the intervention. Regulation (EC) 2038/2006 puts in place a multi-annual financial framework for pollution response for the years 2007-2013. The Commission does not foresee any changes to this framework. In conclusion: no increase of costs for EMSA is foreseen for the period 2007-2013. Should any additional costs arise for EMSA during the period 2014-2020 they should primarily be covered by redeployment of the already agreed resources.

26.

5. ADDITIONAL INFORMATION


Amendment of existing legislation

Adoption of the regulation includes an amendment to Directive 2004/35/EC (Environmental liability)

Delegation

The Regulation foresees the development of technical details of a common reporting format through a delegated act and potential updates to technical annexes via an implementing act.

27.

European Economic Area and Energy Community


The proposal has potential relevance for the EEA and the Energy Community.
  • 1. 
    As defined in the
     
  • 2. 
    As per
     
  • 3. 
    Total loss of the unit including constructive total loss from an insurance point of view; however, the unit may be repaired and put into operation again.

     
  • 4. 
    Severe damage to one of more modules of the unit; large/medium damage to load-bearing structures; major damage to essential equipment.

     
  • 5. 
    HSE Economic Analysis Unit (EAU) appraisal values, 2006 (Q3) Short version, 28/07/08, www.hse.gov.uk/economics/eauappraisal

     
  • 6. 
    BP Sustainability Review 2010, www.bp.com/liveassets/bp_internet/globalbp

     
  • 7. 
    BP fourth quarter and full year 2010 results, www.bp.com/liveassets/bp_internet/globalbp

     
  • 8. 
    Under the US Clean Water Act, 1,100 dollars are to be paid for each barrel spilled; this amount may increase to 4,300 dollars if the spill is the result of gross negligence.

     
  • 9. 
    Source:
     
  • 10. 
    As defined in the
     
  • 11. 
    Costs estimated in December 2009 US dollars and include property damage, debris removal, and cleanup. Excluded were the costs of business interruption, extra expense, employee injuries and fatalities, and liability claims. Source:
     
  • 12. 
    As defined in the
     
  • 13. 
    Offshore blowouts result from gas, or gas and oil escaping out of control under high pressure from subsurface reservoirs during drilling or production. Oil may be released either at the water surface or on the sea bottom, depending on the type of drilling rig being used, and other factors. Every modern rig has a set of large control valves, known as blowout preventers, to stop the flow of oil, gas and other well fluids if problems occur during drilling.

     
  • 14. 
    As defined in the
     
  • 15. 
    Definition as per SINTEF, www.sintef.no/Home/Technology-and-Society

     
  • 16. 
    As defined in the
     
  • 17. 
    Source: ITOPF, -->
     
  • 18. 
    The Iran-Iraq war either caused or prevented blowouts in this field from being capped.

     
  • 19. 
    home.versatel.nl/the_sims/rig/ekofiskb

     
  • 20. 
    As defined in the
     
  • 21. 
    BP fourth quarter and full year 2010 results, www.bp.com/liveassets/bp_internet/globalbp

     
  • 22. 
    In the case of the offshore spill, there may be greater release, a greater degree of uncertainty about the size of the spill, a different type of oil dispersal due to release near the seabed, and a more complex (and potentially costly) process for capping a spill. Conversely, a large number of tanker wrecks occur on, or close to the coastline, potentially increasing cleanup costs when compared with offshore spills due to shoreline oiling.

     
  • 23. 
    Communication from the Commission to the European Parliament and the Council on a second set of Community measures on maritime safety following the sinking of the oil tanker Erika, COM(2000) 802 final, eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2000:0802:FIN:EN:PDF

     
  • 24. 
    The Prestige: one year on, a continuing disaster, www.wwf.fi/www/uploads/pdf

     
  • 25. 
    HSE Economic Analysis Unit (EAU) appraisal values, 2006 (Q3) Short version, 28/07/08, www.hse.gov.uk/economics/eauappraisal

     
  • 26. 
    As defined in the
     
  • 27. 
    As per
     
  • 28. 
    As defined in the
     
  • 29. 
    As per
     
  • 30. 
    Total loss of the unit including constructive total loss from an insurance point of view; however, the unit may be repaired and put into operation again.

     
  • 31. 
    Severe damage to one of more modules of the unit; large/medium damage to load-bearing structures; major damage to essential equipment.

     
  • 32. 
    HSE Economic Analysis Unit (EAU) appraisal values, 2006 (Q3) Short version, 28/07/08, www.hse.gov.uk/economics/eauappraisal

     
  • 33. 
    Under the US Clean Water Act, 1,100 dollars are to be paid for each barrel spilled; this amount may increase to 4,300 dollars if the spill is the result of gross negligence.

     
  • 34. 
    Source:
     
  • 35. 
    Costs estimated in December 2009 US dollars and include property damage, debris removal, and cleanup. Excluded were the costs of business interruption, extra expense, employee injuries and fatalities, and liability claims. Source:
     
  • 36. 
    Offshore blowouts result from gas, or gas and oil escaping out of control under high pressure from subsurface reservoirs during drilling or production. Oil may be released either at the water surface or on the sea bottom, depending on the type of drilling rig being used, and other factors. Every modern rig has a set of large control valves, known as blowout preventers, to stop the flow of oil, gas and other well fluids if problems occur during drilling.

     
  • 37. 
    Source: ITOPF, -->
     
  • 38. 
    The Iran-Iraq war either caused or prevented blowouts in this field from being capped.

     
  • 39. 
    International Oil Pollution Compensation Funds, www.iopcfund.org.

     
  • 40. 
    Source:
     
  • 41. 
    HSE Economic Analysis Unit (EAU) appraisal values, 2006 (Q3) Short version, 28/07/08, www.hse.gov.uk/economics/eauappraisal

     
  • 42. 
    SINTEF Offshore Blowout Database, www.sintef.no/sintefcom/Technology-and-Society

     
  • 43. 
    An incident where hydrocarbons flow from the well at some point where flow was not intended and the flow was stopped by use of the barrier system that was available on the well at the time of the incident. Definition as per SINTEF.

     
  • 44. 
    HPHT wells are wells with expected shut-in pressure equal to or above 690 bar (10,000 psi) and/or bottomhole temperature exceeding 150°C.
     
  • 45. 
    As provided in
     
  • 46. 
    Excluding shallow gas incidents and assuming: 1) 7% of all wells drilled are HPHT; 2) 0.08 coiled tubing operations per well year; 3) 0.05 snubbing operations per well year; and 4) 0.17 workover operations per well year, all as per Scandpower. Number of wells does not include those in Bulgaria, Cyprus, Germany, Malta, or Romania.

     
  • 47. 
    Scandpower figures are based on a sample of 95,270 oil well years and 82,204 gas well years in the combined areas of US GoM and North Sea.

     
  • 48. 
    Det Norske Veritas, Environmental Risk Assessment of Exploration Drilling in Nordland VI, Report No. 20/04/2010, www.olf.no/PageFiles/6525/Environmental%20risk%20assessment%20of%20exploration%20drilling%20in%20Nordland%20VI.pdf

     
  • 49. 
    Source: www.ptil.no/ageing-and-life-extension/category626

     
  • 50. 
    Source: www.offshore-mag.com/index/article-display

     
  • 51. 
    There are activities planned in the UK, west of Shetlands at sea depths of up to 1,600 metres, near the Faroe Islands at sea depths of 1,100 metres and in Norway at up to 1,700 metres.

     
  • 52. 
    Prospecting is taking place in the Barents Sea and off Greenland. In April 2011, Statoil announced a significant oil discovery on the Skrugard prospect in the Barents Sea.

     
  • 53. 
    'HPHT developments in the UKCS' Ref www.hse.gov.uk/research/rrpdf/rr409.pdf

     
  • 54. 
    'kick' is an industry term used for situations of sudden escalation of well pressure leading to temporary disruption of the standard operation of the well.

     
  • 55. 
    Council Directive 96/82/EC of 9 December 1996 on the control of major-accident hazards involving dangerous substances, OJ L 345, 31.12.2003, p.
     
  • 56. 
    It comprises identifying major accident scenarios, assessing consequences and likelihood to evaluate risks, identifying control and mitigation measures, and developing suitable management arrangements for implementing the measures. The approach to each MAH site should be contained within a company safety report or safety case. This may be provided to the national regulator for regulatory assessment.

     
  • 57. 
    The UK
     
  • 58. 
    More details on available studies and reports in Annex IX.

     
  • 59. 
    UK offshore enforcement statistics since 2001/02 (comprising the total number of prosecutions and statutory improvement or prohibition notices) are broadly steady over the past 10 years at 49/year (2010/11 provisionally = 47). See Annex XIII for more information on benchmarking between sectors/countries.

     
  • 60. 
    E.g. of OSPAR countries five (UK, N, NL, DK and D) have evaluated their operations and all have identified improvement needs.(source: Investigations of Drilling in Extreme Conditions and their Relevance to Potential Environmental Impacts - Preliminary
     
  • 61. 
    For example along the lines of Senior Labour Inspectors' Committee (SLIC), or the North Sea Offshore Authorities Forum in other regions. Refer to DG.EMPL/B3 website for further information.

     
  • 62. 
    Ref United Nations Convention on the Law of the Sea, 1964.

     
  • 63. 
    Under this approach, operators are required to identify and assess the major risks case by case and demonstrate to the national authorities how these risks would be managed. In certain jurisdictions, the document used is called safety case.

     
  • 64. 
    For example, Romania and Bulgaria have seemingly less comprehensive regulatory regimes than the North Sea states.

     
  • 65. 
    As defined in the
     
  • 66. 
    Source:
     
  • 67. 
    Source:
     
  • 68. 
    Source: Det Norske Veritas, WOAD - Worldwide Offshore Accident Databank, v5.0.1. Summarized in
     
  • 69. 
    Blowout frequencies, Report no. 434-2, March 2010, www.ogp.org.uk/pubs/434-02.pdf

     
  • 70. 
    Source: International Regulator's Forum, IRF Country Performance Measures, www.irfoffshoresafety.com/country/performance/

     
  • 71. 
    Det Norske Veritas, Environmental Risk Assessment of Exploration Drilling in Nordland VI, Report No. 20/04/2010, www.olf.no/PageFiles/6525/Environmental%20risk%20assessment%20of%20exploration%20drilling%20in%20Nordland%20VI.pdf

     
  • 72. 
    Although the baseline scenario has been calculated on this basis, it is likely that actual figures are higher because of the higher accident indicator rates associated with prescriptive offshore safety regimes.

     
  • 73. 
    Number of staff include all management, professional (senior inspectors, inspectors and other technical staff), legal and administrative staff combined. Installations include all fixed, mobile and subsea production and drilling units. Source: European Commission questionnaire data collected from Denmark (Danish Energy Agency, but not including the relevant staff of the Ministry of the Environment), Italy (National Office for Mining, Hydrocarbons and Geothermal Resources), the Netherlands (State Supervision of Mines), Norway (Petroleum Safety Authority and Climate and Pollution Agency), and the UK (Health and Safety Executive, Department of Energy and Climate Change).

     
  • 74. 
    Source: European Commission questionnaire data collected from Denmark (Danish Energy Agency, but not including the relevant staff of the Ministry of the Environment), Italy (National Office for Mining, Hydrocarbons and Geothermal Resources), the Netherlands (State Supervision of Mines), Norway (Petroleum Safety Authority and Climate and Pollution Agency), and the UK (Health and Safety Executive, Department of Energy and Climate Change).

     
  • 75. 
    Installations include all fixed, mobile and subsea production and drilling units. Source: European Commission questionnaire data collected from Denmark (Energi Styrelsen, but not including the relevant staff of Miljøministeriet), Spain (Minesterio de Industria, Turismo y Comercio), the Netherlands (Staatstoezicht op de Mijnen) and the UK (Health and Safety Executive, Department of Energy and Climate Change).

     
  • 76. 
    Corrected for differences in national hourly wage rates according to Eurostat hourly labour costs, 2004, -->
     
  • 77. 
    Source: European Commission questionnaire data.

     
  • 78. 
    Source: European Commission questionnaire data.

     
  • 79. 
    Source: European Commission questionnaire data.

     
  • 80. 
    COM(2010) 600 final, 26.10.2010

     
  • 81. 
    Impact assessment study into possible options for amending the Seveso II Directive, Final Report, September 2010, COWI, ec.europa.eu/environment/seveso/pdf/Seveso%20IA_Final%20report.pdf

     
  • 82. 
    After levelling-up to North Sea standards, the running safety compliance costs to industry are estimated at
     
  • 83. 
    Source:
     
  • 84. 
    Source: European Commission questionnaire data collected from Italy (Ufficio Nazionale Minerario per gli Idrocarburi e le Georisorse), the Netherlands (Staatstoezicht op de Mijnen), and the UK (Health and Safety Executive, Department of Energy and Climate Change).

     
  • 85. 
    Source: European Commission questionnaire data collected from Spain (Ministry of Industry, Tourism and Trade), the Netherlands (State Supervision of Mines), Norway (Petroleum Safety Authority and Climate and Pollution Agency), and the UK (Health and Safety Executive, Department of Energy and Climate Change).

     
  • 86. 
    Article 194

     
  • 87. 
    Article 153(1) and (2)

     
  • 88. 
    Article 191(2), first indent

     
  • 89. 
    See COM(2008) 791 final of 25.11.2008 and COM(2010) 771 of 17.12.2010

     
  • 90. 
    COM(2010) 461 final of 8.9.2010

     
  • 91. 
    ECJ case C-188/07 (Commune de Mesquer v Total France SA and Total International Ltd.) provides important jurisprudence. The ECJ in the abovementioned case concerning maritime transport (Erika tanker accident) came to the conclusion that oil accidentally spilled at sea following a shipwreck, mixed with water and sediment and drifting along or being washed at the coast of a Member States constitutes waste within the meaning of the Waste Framework Directive.

     
  • 92. 
    As defined in the
     
  • 93. 
    Refer to S. 3.3.2 (6) for clarification of the term Competent Authority, which is related to law and not to skill

     
  • 94. 
    NSOAF stands for the North Sea Offshore Authorities Forum, a voluntary grouping of offshore regulatory authorities from the North Sea area used by them for exchange of
     
  • 95. 
    Explanatory reference

     
  • 96. 
    International groups like OGP, and national ones like OLF (Norway) and Oil and Gas UK work intensively with national agencies on hardware and operational solutions to respond to deepwater drilling incidents.

     
  • 97. 
    Such as those developed for the Baltic Sea under the Helsinki Convention (www.helcom.fi/).

     
  • 98. 
    Directive 2004/35/CE of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage

     
  • 99. 
    Directive 2000/60/EC

     
  • 100. 
    Lifecyle stages: Design options, construction and commissioning; operations and maintenance; modification and decommissioning

     
  • 101. 
    This would include aspects like good practices for major hazards control; revised technical standards in, for example, well control and process safety, well capping and emergency response; and establishment of cooperative associations for sharing assets for tackling major pollution events.

     
  • 102. 
    Lifecyle stages: Design options, construction and commissioning; operations and maintenance; modification and decommissioning

     
  • 103. 
    Regulation (EC) No 1013/2006 of the European Parliament and of the Council of 14 June 2006 on shipments of waste

     
  • 104. 
    These include: guidance on good practices for major hazards control; revised technical standards in, for example, well control and process safety, well capping and emergency response; and establishment of cooperative associations for sharing assets for tackling major pollution events.

     
  • 105. 
    International Association of Oil and Gas Producers, www.ogp.org.uk/

     
  • 106. 
    Global Industry Response Group recommendations
     
  • 107. 
    As defined in the
     
  • 108. 
    As per
     
  • 109. 
    International Petroleum Industry Environmental Conservation Association: the global oil and gas industry association for environmental and social issues
     
  • 110. 
    OSPRAG Second Interim Report
     
  • 111. 
    BOP: Blow-Out Preventer: safety device to close-in or seal off a (flowing) well.

     
  • 112. 
    Offshore Pollution Liability Association Ltd. A voluntary, industry mutual agreement to settle claims as a result of an oil spill. Current limit for claims is set at
     
  • 113. 
    Operators Co-operative Emergency Service, provides a framework around which an operator may acquire equipment from another operator in an emergency, even across international boundaries.

     
  • 114. 
    DG
     
  • 115. 
    OGP 2010 report Appendix D. -->
     
  • 116. 
    Sanco report says 'Please note that despite the harmonisation efforts undertaken by the respective data centres and data providers in the member states, the injury statistics may not always be completely comparable and the differentiation in sections of injury surveillance is not always clear-cut. There are many reasons for this ranging from differences in the organisation of the national health care systems to cultural differences in the reporting of injury causes'.

     
  • 117. 
    IRF data sheet 2009: -->
     
  • 118. 
    For entry to the data bank: www.hse.gov.uk/statistics/index

     
  • 119. 
    Latest (to 2010) is at: www.hse.gov.uk/offshore/statistics/hsr0910.pdf ; see also a quick synopsis (to 2011) at: www.hse.gov.uk/offshore/statistics/stat1011

     
  • 120. 
    Ministero dello Sviluppo Economico/ Dipartimento per l'Energia / Direzione Generale per le Risorse Minerale ed Energetiche 2009: unmig.sviluppoeconomico.gov.it/unmig/stat

     
  • 121. 
    www.ogp.org.uk/pubs/455.pdf

     
  • 122. 
    OGP 2009 environmental report: www.ogp.org.uk/pubs/442.pdf

     
  • 123. 
    DECC portal for OSPAR agreed environmental management statements is at: https:// -->
     
  • 124. 
    Danish Energy Agency annual report 2010 pp 35-42: www.ens.dk/Documents/Netboghandel%20-%20publikationer/2011/Denmarks_oil_and_gas_production_2010.pdf ; see also DECC policy and guidance at: https://www.og.decc.gov.uk/

     
  • 125. 
    Developing process safety key performance indicators www.hse.gov.uk/pubns/priced/hsg254.pdf ; Norway: Trends in risk level in the petroleum activity
     
  • 126. 
    The UK trade body, Oil
     
  • 127. 
    English summary of PSA's evaluation of DwH disaster: www.ptil.no/getfile.php/PDF/DwH_PSA_summary.pdf

     
  • 128. 
    As per