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The New European Oil and Gas Health and Safety Directive - what are the implications for the UKCS?

Friday, March 15, 2013
from Brodies LLP

Last month Günther Oettinger, the European Commissioner for Energy, announced his eagerly-awaited plan for Oil and Gas European Health, Safety and Environmental regulation in the wake of the Macondo incident. The proposed directive that he unveiled confirms that, although there will be further points to follow from Europe, the role and remit of the existing UK Health and Safety Executive (HSE) system will continue. This was greeted warmly by Oil and Gas UK as welcome recognition of the high standards in offshore safety that have been achieved since the Piper Alpha disaster.

The intention to seek legislative change flows from the Macondo incident in the Gulf of Mexico, the tragic consequences of which are well known, and the determination to prevent a similar disaster happening in the North Sea by adopting best practice across Europe. In October 2011 the European Commission (EC) published draft legislative proposals for offshore safety as it believes “the likelihood of a major offshore accident in European waters remains unacceptably high.” The EC had signalled its intention to prepare a Regulation that would apply to all of the European Union’s (EU) 27 member states and Norway, which is a member of the European Economic Area (EEA).

There was concern that a large oil release/spill could affect several EU or EEA member states. Given the extent of the Macondo spill and the fact that such a spill would not be bound by national boundaries the EU sought to introduce pan-European regulation to ensure consistency in relation to offshore health and safety and environmental regulation and obligations.

In autumn 2011 there were nearly 1,000 offshore installations operating in the EU. Nearly half were in the UK but there were also many off Denmark, Holland and Italy. Along with those with more established drilling activity and Health, Safety, Environment and Quality regimes there were newer entrants with less established regimes including Romania, Spain, Germany, Ireland, Greece, Bulgaria and Poland. There were also plans for drilling off Cyprus and Malta.

Developments in technology had been opening up opportunities and these advances, combined with the high price of oil, were also making reserves that were in deeper water with high pressure high temperature wells more viable. Of course, these new opportunities also mean new risks in areas earmarked for exploration drilling in deep water West of Shetland, off Norway toward the Arctic and in Romanian waters of the Black Sea.

Of course, the UK has established a health and safety regime that is widely regarded as the 'gold standard', built on the harsh lessons learnt following the Piper Alpha explosion in 1988 and the recommendations made by Lord Cullen's public inquiry into the disaster. The EU had commented that the North Sea "risk-based regulatory framework is considered amongst the very best in the world". In addition, post Macondo, there was a prompt and comprehensive response by the UK, for example convening the Oil Spill Prevention and Response Advisory Group (OSPRAG), which EU representatives were invited to attend and observe. In addition, there were various reviews, such as the report commissioned by Oil & Gas UK and GL Noble Denton and further comment, analysis by Professor Maitland who reported on the UK response in December 2012.

Along with the meetings and reviews there was also action. In May 2011, a major two-day drill, Exercise SULA, was carried out to simulate how the UK would react to a major oil spill incident offshore, with a focus on well control, at sea counter pollution measures and shoreline protection. The exercise tested subsea well control response capability, command and control functions, and the counter pollution response used to control an ongoing oil spill. During July 2011, the UK oil and gas industry also successfully tested its ability to deploy a well capping device in the waters west of Shetland.

Following the announcement by the EU in October 2011 of its plan to take control of safety regulation of the oil and gas sector, there was significant concern that the long established but continually improving goal based, robust system operated by the HSE could be replaced with a potentially less safe system of EU regulation. Under EC law, a regulation must be applied across all member states. A directive, which is what is now being proposed, is only binding in terms of the result that must be achieved. That means each member state can decide for itself what measures it wishes to implement to achieve the desired outcome. The laws of a member state may sometimes already comply with this outcome, in which case the state concerned would be required only to keep its laws in place. Usually, however, a member state needs to make changes to its law (transposition) for a directive to be implemented correctly. If a member state does not pass the required national legislation, or the national legislation does not adequately comply with the requirements of the directive, the EC may initiate legal action against the member state in the European Court of Justice.

Robert Paterson of Oil & Gas UK said: “Oil & Gas UK has worked tirelessly to highlight the very real damage that an EU Regulation could have done to workers’ safety. The Commission’s decision today to establish a directive on offshore safety is the best way to achieve the objective of raising standards across the EU to the high levels already present in the North Sea. The UK oil and gas industry looks forward to working closely with the Commission to help disseminate North Sea experience and good practice across Europe by ensuring the directive is appropriately worded.”

From a commercial viewpoint an entirely new Offshore health and safety system operated and administered by another regulatory entity would have caused a great deal of disruption in the UKCS.

The crucial question of what measures need to be put in place to ensure that the UK legislation complies with the directive is still to be addressed. The main elements of the preliminary EU directive are:

  • licensing rules for effective prevention of and response to a major accident;
  • independent national competent authorities responsible for the safety of installations will verify the provisions for safety, environmental protection, and emergency preparedness of rigs;
  • emergency planning requires companies to prepare reports on major hazards, containing an individual risk assessment and risk-control measures, and an emergency response plan before exploration or production begins;
  • technical solutions presented by the operator need to be verified independently prior to and periodically after the installation is taken into operation. Companies will publish information about standards of performance. The confidentiality of whistle-blowers will be protected and operators will be requested to submit reports of incidents overseas to enable key safety lessons to be studied;
  • companies will prepare emergency response plans based on their rig or platform risk assessments and EU member states will likewise take full account of these plans when they compile national emergency plans, which will be tested by the industry and national authorities;
  • oil and gas companies will be fully liable for environmental damage caused to the protected marine species and natural habitats. For damage to waters, the geographical zone will be extended to cover all EU waters, including the exclusive economic zone (about 370 km from the coast) and the continental shelf where the coastal member states exercise jurisdiction;
  • offshore inspectors from member states will work together to ensure effective sharing of best practices and contribute to developing and improving safety standards. The EU Commission will work with its international partners to promote the implementation of the highest safety standards across the world. Operators working in the EU will be expected to demonstrate they apply the same accident-prevention policies overseas as they apply in their EU operations.

The UK has adapted and continually pushed Oil and Gas Health and Safety forward following Piper Alpha and Lord Cullen's report. This looks likely to continue, though there will be additional points from the directive to consider. The success of Oil and Gas UK (and others) in preserving the existing regime is to be praised and ought to give stability, continuity and certainty in the UK sector. It is reassuring to note that the new directive will not seek to duplicate what has been achieved in the UK, or to compromise our regime, but instead build on the best practice achieved in the UK to raise safety standards across the EU.

Contribution by
from Brodies LLP

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This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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