Changes to offshore safety regulations are estimated to cost offshore businesses around £193.4 billion: a worthwhile cost to prevent another Deepwater Horizon?

On 19 July 2015, new regulations will come into force in England and Wales applying to all offshore operators and owners, aimed at preventing major offshore incidents. The regulations implement the EU Safety of Offshore Oil and Gas Operations Directive (OSD)1. It provides a high level of protection and safety for offshore workers and the marine environment. The EU adopted the OSD on 10 June 2013 following the 2010 Deepwater Horizon incident, and after a comprehensive review of existing offshore regulations.

The Health and Safety Executive (HSE) and the Department of Energy and Climate Change (DECC), working in partnership, have established the Offshore Safety Directive Regulator2 (as the Competent Authority) to implement the regulations.

We focus on two of the new regulations to be implemented: the Offshore Installations (Offshore Safety Directive) (Safety Case etc.) Regulations 2015 and The Offshore Petroleum Licensing (Offshore Safety Directive) Regulations 2015. We consider the potential effects of the new regulations, and what the offshore industry can do to prepare for their implementation.

Offshore Installations (Offshore Safety Directive) (Safety Case etc.) Regulations 2015

“Safety case” obligations

An owner/operator of an installation must prepare a “safety case” which sets out an installation’s safety and environmental management system and control system for major accident hazards. The particulars of the “safety case” are set out in schedules 6 and 7 to the regulations and include:

  • A corporate major accident prevent policy (CMAPP).
  • A safety and environmental management system (SEMS).

An owner/operator must also establish a verification scheme to ensure that the plant for the installation is suitable and remains in good condition.

If there is a major accident, or an immediate risk of such an accident, the owner/operator is obliged to inform the competent authority.

It is therefore essential that an owner/operator has a thorough understanding of the risks that the installation is exposed to, and what mitigation is available.

It should also be noted that UK registered companies are required to provide the competent authority with information about accidents outside the EU in which they, or their subsidiaries, are involved as licensees, operators or well operators.

The Offshore Petroleum Licensing (Offshore Safety Directive) Regulations 2015

Granting and transferring offshore licenses

These regulations govern the granting and transfer of licences for offshore petroleum operations. The licensing authority (DECC), before granting an offshore licence or consenting to transfer an offshore licence, must take into consideration the sensitivity of the marine environment, and the technical and financial capability of the prospective offshore licensee. This is to ensure that ecosystems and special conservation areas are protected, and also a comprehensive system is maintained to manage and control offshore major hazards.

Under the regulations, no person may conduct an offshore petroleum operation who is not an operator in respect of that operation. An operator can be appointed by offshore licensees or the licensing authority (in exceptional circumstances). An appointment of an operator may be terminated if the competent authority considers that the operator no longer adequately fulfils the requirements of the OSD.

Obligations on offshore petroleum licensees/operators

By regulations 9 and 10, the offshore licensee will be financially responsible for action to be taken to prevent or remediate environmental damages.

Non-compliance with the regulations is an offence under the regulations, punishable by a fine. This puts greater pressure on operators to comply with their obligations.

What next?

The regulations include transitional arrangements which, broadly, allow existing installations until 19 July 2018 to comply. In the meantime, industry responses to the new regulations have been largely positive, although concerns have been raised as to how the changes will be implemented.

Greater transparency and good corporate governance systems are aimed to help offshore operations to comply with their obligations. Offshore licensees, owners, and operators should therefore review their current systems so that they are well placed to adapt to the changes.

Government guidance is expected to be issued shortly, which will assist offshore licensees, owners, and operators to implement the changes to the current law, especially as the transitional arrangements are complicated3.