EUROPEAN COMMISSION

Brussels, 16.11.2020

SWD(2020) 269 final/2

CORRIGENDUM:
This document corrects document SWD(2020) 269 final of 16.11.2020
Concerns the correction of the title on the cover page.
The text shall read as follows:

COMMISSION STAFF WORKING DOCUMENT

Accompanying the document

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL AND THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

assessing the implementation of Directive 2013/30/EU of the European Parliament and of the Council of 12 June 2013 on the safety of offshore oil and gas operations and amending Directive 2004/35/EC

{COM(2020) 732 final}

Table of contents

Executive Summary

1Introduction

2Background to the intervention

2.1Description of the intervention and its objectives

2.2Baseline and points of comparison

2.2.1Problems related to industry evolution

2.2.2Problems related to company-specific corporate practice

2.2.3Problems related to the regulatory framework

2.2.4Problems related to the state of risk-based planning

2.2.5Problems related to the integration of public and industry emergency plans and assets

2.2.6Problems related to clarity and comprehensiveness of liability provisions

2.2.7Baseline costs of a major accident

3Method

3.1Short description of methodology

3.2Limitations and robustness of findings

4State of play and implementation

4.1The offshore oil and gas sector

4.1.1Offshore operations and the Green Deal

4.1.2Offshore Safety and COVID-19

4.1.3Oil prices, investments and offshore safety

4.1.4The European offshore sector

4.1.5Incident rates and safety performance

4.2Implementation of the Directive by Member States

5Achievements assessed by themes

5.1Overview on the themes analysed

5.2Applying risk management principles for control of major accidents

5.3Public participation in release of new areas for licensing

5.4Assignment of the Competent Authority

5.5Functioning of scheme of independent verification for installations and wells

5.6Safety in operations conducted outside EU

5.7Arrangements for worker involvement in major accident prevention

5.8Transparency concerning reporting of incidents – the Implementing Regulation

5.9Emergency preparedness and response arrangements of operators/ owners

5.10Emergency preparedness and response arrangements of Member States

5.11Availability of dissuasive penalties for breaches of duty

5.12Recovery of costs of maintaining the competent authority

5.13Special theme: Liability, compensation claims and financial security of offshore oil and gas producers

5.13.1The framework

5.13.1.1Overview

5.13.1.2Legal provisions of the Directive

5.13.2Commission report on liability, compensation and financial security

5.13.2.1The European Parliament’s resolution on liability and compensation claims

5.13.3Diversity of rules on liability, handling of compensation claims, and financial security instruments in Member States’ jurisdictions

5.13.4Implementation by Member States and the effectiveness of rules

5.13.5The Oil Pollution Liability Agreement (OPOL)

5.13.6Financial security

5.13.7Conclusions

5.14Special theme: Criminal sanctions to breaches of duty to safeguard the environment from major accidents

5.15Special theme: Post-decommissioning responsibility for ensuring permanent sealing of wells, and for determining extent of removal of fixed installations

5.15.1Overview

5.15.2Provisions of the Directive on the decommissioning of installations

5.15.3The requirements for extent of removal of fixed production installations

5.15.3.1The Offshore Safety Directive

5.15.3.2Other EU law

5.15.3.3International policies

5.15.3.4Current practice of decommissioning

5.15.3.5The decommissioning of Brent platforms

5.15.4Conclusions

5.15.5The permanent sealing of wells

5.15.5.1The Offshore Safety Directive

5.15.5.2Technical challenges and available technologies

5.15.5.3Conclusions

5.15.6Biogenic methane seepage

5.16Special theme: Mutual recognition of mobile drilling units (MODU)

6Achievements assessed by horizontal criteria

6.1.1Overview

6.1.2Relevance

6.1.3Coherence

6.1.4Effectiveness

6.1.5Efficiency

6.1.6EU-Added Value

7Conclusions

7.1Strengths and weaknesses

7.2Areas to follow-up

7.3Overall assessment

8ANNEXES TO THE STAFF WORKING DOCUMENT (SWD)

9Annex I: Organisation and Timing

9.1Lead DG & DECIDE planning info

9.2Organization and Timing

9.3Evidence and Sources

9.4Discussions in the Commission's Inter Service Group

10Annex II: Stakeholder Consultation

10.1Consultation scope and objectives

10.2Mapping and participation of stakeholders

10.3Selection of consultation activities and their accessibility

10.4Summary /overview on consultation activities by stakeholder groups and indicative timing

10.5Consultation webpage & communication activities

10.5.1Roadmap of the Evaluation

10.5.2Questionnaire for public consultation

10.5.3Position Statements received from Stakeholders

10.6Synopsis of Consultation Activities

10.6.1February-March 2018:

10.6.2March 2018:

10.6.303 May 2018 to 31 May 2018:

10.6.419 September and 4-5 December 2018:

10.6.519 September to 21 December 2018: public consultation

10.6.616 and 17 January 2019:

10.7Stakeholder positions

11Annex III: Member States’ implementation of the Directive

12Annex IV: Methodology for the assessment

12.1Consolidated list of 15 thematic indicators undergoing analysis

12.2Matrix for the detailed assessment

12.2.1Structure of the assessment matrix

13Annex V: Other EU Legislation, International Conventions and Protocols relevant to offshore oil and gas activities

13.1Primary law

13.2EU Directives

13.2.1Mining and other fossil fuel extraction activities

13.2.2Product safety

13.2.3Environmental policies

13.2.4Health and safety of workers at work

13.2.5Cyber security and external threats

13.2.6Whistle-blower protection

13.3EU Regulations

13.4EU Decisions

13.5International conventions

13.5.1Regional seas conventions

13.5.2International and regional acquis pertinent for claims for damages from an offshore oil or gas incident

13.6Others (e.g. resolutions, agreements etc.)

14Annex VI: Liability, Financial Responsibility and Compensation Claims

14.1Views from stakeholders on liability, handling of compensation claims and financial security

14.1.1Liability – views from the industry

14.1.2Handling of compensation claims – views from the industry

14.1.3Financial security – views from the industry

14.1.4Views from non-governmental associations (NGOs)

14.1.5Views from the insurance sector

14.2Reference documents

15Annex VII: Statistical background information

15.1Oil and gas industry’s activity 2010 – 2020

15.2Accidents and incidents and international benchmarking

15.3Total running costs of duty holders for implementation of the Directive

16Annex VIII: Views from stakeholders on liability, handling of compensation claims and financial security

16.1Liability - views from the industry

16.2Handling of compensation claims – views from the industry

16.3Financial security – views from the industry

16.4Views from non-governmental associations (NGOs)

16.5Views from the insurance sector

Executive Summary

The Offshore Safety Directive, applicable for oil and gas operations, addresses control of risk of major offshore accidents, in addition to response and recovery mechanisms, should preventive measures fail. The Directive applies to all Member States and predominantly affects the 15 Member States who are active or planning offshore oil and gas operations. At the date of drafting, it applies to the UK until 31 December 2020 when transitional arrangements expire. The Directive draws on existing international best offshore practices for control of risk and improved emergency response.

The general deadline for implementation for Member States was 19 July 2015, and transitional periods for the industry applied until 19 July 2018. One year after the latter deadline, in accordance with Article 40 of the Directive, the Commission was obliged to assess the experience of implementing the Directive.

According to notifications from Member States of their national transposition measures, the Directive’s measures have been adequately implemented. Crucially, industry has adopted clear duties for management of risk, with each offshore installation having a detailed risk report. Equally, each Member State has appointed an expert Competent Authority with comprehensive powers of oversight. EU annual reports on Union wide safety for offshore oil and gas operations have been published for the years 2016, 2017 and 2018. These reports in combination with other data enable a risk performance baseline to be developed, although it is early to identify trends.

The content of this assessment is based on intensive stakeholder engagements, including workshops and public consultation. These data collection methods generated a dense database of primarily qualitative information which was complemented by Commission expertise. Based on Articles and Annexes of the Directive, and interactions with stakeholders, 15 priority themes were identified, which were analysed.

The clearest indication of the Directive’s success is that the aims of the intervention are being met through the Member States’ transposition. Moreover, the Directive’s requirements are being followed by industry and Member States, albeit with some differences in the detail of application. Overall, the efforts of implementation appear in line with the Commission’s forecast. Most of the emerging themes may be handled under existing communication protocols, as in the European Offshore Authorities Group (EUOAG), whilst a few justify further scrutiny.

In providing feedback, Member States and industry welcomed the introduction of the Directive. The views of environmental non-governmental organisations (NGO’s) are more nuanced, and call for then further tightening of some measures. All stakeholders maintain that more time and monitoring is required before considering any changes.

Additional analysis is presented on the topics of liability and the handling of compensation claims, the appropriateness of criminal sanctions, the removal and detoxification of fixed production platforms, and the mutual recognition of mobile drilling units in Member States’ different jurisdictions.

Glossary

ACSNI: Advisory Committee on the Safety of Nuclear Installations

ALARP: As Low As Reasonably Practicable (principle) - Reduction of the risk of a major accident to the point where the cost of further risk reduction would be grossly disproportionate to the benefits of such reduction.

API: American Petroleum Institute

CEN: European Committee for Standardisation

CMAPP: Corporate Major Accident Prevention Policy - The corporate level policy by which owners, licensees, and operators responsible for offshore oil and gas operations establish consistent, corporate-wide mechanisms for preventing major accidents (see Annex I - part 8 of the Directive).

ECD: Environmental Crime Directive

ECI: European Critical Infrastructures - Critical infrastructure located in EU Member States, the disruption or destruction of which would have a significant impact on at least two EU Member States.

EEA: European Economic Area

EERP: External Emergency Response Plan

EEZ: Exclusive Economic Zone - The offshore zone beyond the territorial waters prescribed by the 1982 United Nations Convention on the Law of the Sea which a state has special rights regarding the exploration and exploitation of marine, mineral and energy resources, including energy production from water and wind.

EIA: Environmental Impact Assessment

ELD: Environmental Liability Directive

EMSA: European Maritime Safety Agency

EU: European Union

EUOAG: European Union Offshore Authorities Group

GIRG: Global Incident Response Group (IOGP)

HELCOM: Baltic Marine Environment Protection Commission - Helsinki Commission - An intergovernmental organization and the governing body of the Convention on the Protection of the Marine Environment of the Baltic Sea Area (Helsinki Convention). HELCOM consists of ten members - the nine Baltic Sea countries: Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Russia and Sweden, plus the European Union.

HPHT: High Pressure High Temperature - Term referring to oil or gas wells which exhibit characteristics of high temperature and high pressure.

HSE: Health and Safety Executive (UK)

IA: Impact Assessment

IADC: International Association of Drilling Contractors

IERP: Internal Emergency Response Plan - Plan at the level of the operator or owner of an offshore oil and gas installation, regarding their response to emergencies such as oil spills, fire, explosion, vessel collision, or personnel evacuation.

ILO: International Labour Organization

IMO: International Maritime Organization

IMP: Integrated Marine Policy

IOGP: International Oil and Gas Produces Organization

IUMI: International Union of Marine Insurance

KPI: Key Performance Indicator - A measurable value that demonstrates how effectively an objective is achieved.

MODU: Mobile Offshore Drilling Unit

MS: Member State

NGO: Non-Governmental Organization

NIS Directive: Directive 2016/1148/EU on Security of Network and Information Systems

OPA: Oil Pollution Act 1990 (USA)

OPEP: Oil Pollution Emergency Plan (Oil & Gas UK)

OPOL: Offshore Pollution Liability Agreement

OSD: Offshore Safety Directive (2013/30/EU)

OSPAR: Convention for the Protection of the Marine Environment of the North-East Atlantic

REMPEC: Regional Marine Pollution Emergency Response Centre for the Mediterranean Sea

RoMH: Report on Major Hazards

SEA: Strategic Environmental Assessment - Assessment of the environmental impact of certain plans and programmes, in the context of Directive 2001/42/EC.

SECE: Safety and Environmental Critical Element - Element of an offshore oil and gas installation whose function is critical to safety and environmental protection.

SEMS: Safety and Environmental Management System - The system of an offshore installation for managing safety and environmental protection in the context of the Directive (see Annex I – part 8 of the Directive)

SEMS: Safety and Environmental Management System - The system of an offshore installation for managing safety and environmental protection (a list of its contents is provided in the Directive, Annex I – part 8)

SLIC: Senior Labour Inspectors' Committee (UK)

SWD: Staff Working Document

TFEU: Treaty of Functioning of the European Union

TU: Trade Union

UK: United Kingdom

UNCLOS: United Nations Convention on the Law of the Sea

USA: United States of America

WFD: Waste Framework Directive

1Introduction

Between 1980 and 2010 there were at least eleven major accidents in offshore petroleum activities which caused significant loss of life and pollution of the sea, as well as economic loss to the coastal states. The two most serious incidents occurred on production installations in European waters, in the North Sea 1 . In April 2010 a disaster in the US Gulf of Mexico at a drilling operation controlled by an EU based company 2 sparked worldwide concerns as to whether the risks of offshore drilling and production were being adequately managed.

Subsequent assessments 3 of the Gulf of Mexico disaster in the US and Europe concluded that the industry was displaying an unacceptable lack of operational integrity, and that major accidents were occurring in situations that were avoidable. Given the offshore petroleum sectors’ high-level of maturity, such accidents were occurring in circumstances that should have been eliminated.

Imbalances and fragmentation characterised the EU regulatory systems for offshore petroleum. Whilst some Member States had offshore regulatory systems considered effective, all had room for improvement. No Member State was able to claim that it was making full use of best practices available in case of major accidents.

The intention of the Offshore Safety Directive 4 (hereafter, the ''Directive'') was to address these shortcomings. The Directive required all Member States to adjust their regulatory systems to a more robust and consistent level, deriving higher standards and greater homogeneity of regulation across the Union.

The Directive, establishing minimum requirements for safety, environmental protection and emergency response across the EU, entered into force on 19 July 2013. Member States had to transpose the Directive into national rules and regulations by 19 July 2015. The full implementation of the Directive acts upon all duty holders namely regulators, operators, and owners of production and non-production installations (e.g. mobile drilling rigs, mobile accommodation units and well intervention vessels). Industry duty holders were required to fully comply with the Directive, as transposed by Member States, by 19 July 2018.

The Commission was obliged to formally assess the implementation of the Directive pursuant to Article 4 which provides that: “No later than 19 July 2019, the Commission shall, taking due account of the efforts and experiences of competent authorities, assess the experience of implementing this Directive”. The overall framework of the assessment shall consider that the aims of the Directive are consistent with the objective of protection of any coastal state.

This assessment addresses the aspects of EU intervention into upstream offshore petroleum activities foreseen by the Directive. These activities include searching for potential underground or underwater crude oil and natural gas fields, drilling exploratory wells, and subsequently drilling and operating the wells that recover and bring the crude oil or raw natural gas to the surface. Foremost is the impact on risk of a major accident occurring, including to the environment. The assessment also includes an in-depth analysis on special themes as for example decommissioning of installations, the mutual recognition between Member States of certified mobile drilling units, liability and the handling of compensation claims by relevant enterprises in the event of a major pollution incident.

The States in this assessment, for which we carry out an in-depth analysis, are the coastal EU Member States with an active offshore petroleum sector, or a policy to become active in coming the years (“focal Member States”): Bulgaria, Croatia, Cyprus, Denmark, France, Germany, Greece, Ireland, Italy, Malta, Netherlands, Poland, Portugal, Romania, Spain and the United Kingdom 5 . The data examined run from 19 July 2015 (deadline for transposition) until July 2019.

Articles 23, 24, and 25 of the Directive concern measures for EU-wide reporting systems, under which the Commission is obliged to make an implementing regulation for common reporting parameters of accidents. This Implementing Regulation (1112/2014/EU) 6 provides reporting formats for Member States for annually publishing incident data and other relevant information. The assessment of the Directive also includes the Implementing Regulation.

Therefore, based on the experience with implementing the Directive, the assessment’s results will provide help to determine whether the Directive is fully adequate and whether it has achieved its objectives. For any identified shortcomings, the assessment will try to present the reasons behind them. These findings may contribute to possible future changes to the legislation.

2Background to the intervention

2.1Description of the intervention and its objectives

Following an assessment of the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, the Commission concluded that the EU’s own offshore drilling conditions left the Union vulnerable to similar incidents 7 . In response, the Commission launched a policy initiative in 2011 for a regulation aimed at preventing major offshore petroleum accidents. This regulation was intended to include measures for more stringent licensing arrangements of operators, improved public consultation, clearer environmental liability, and more effective financial security provisions.

Significantly, the form of the instrument was changed from a regulation to a directive during negotiations in the Council and “Directive 2013/30/EU of the European Parliament and of the Council of 12 June 2013 on safety of offshore oil and gas operations and amending Directive 2004/35/EC” came into effect on 19 July 2013. In contrast to a regulation a directive leaves to the Member States discretion as to the form and methods they choose to reach the result of the Directive. 8

The Directive provides measures that encompass cumulative best global practice regarding the mitigation of major accidents in offshore drilling and oil and gas production. Furthermore, the Directive attempts to improve levels of homogeneity across the sector by applying equal standards and ensuring consistent implementation across geographical areas. Every Member State was required to overhaul its regulatory systems, and the industry was required to produce substantial improvements to its control of major accident hazards.

Furthermore, the Directive specifies an entire regulatory framework for an intensive and technically challenging system for the prevention of major accidents, including to the environment. Since North Sea Member States and Italy had more experience with offshore operations than others, the efforts necessary for adopting new systems and arrangements for both Member States and operators were unevenly distributed in the EU.

The Directive was introduced to remedy the inadequacy of EU legislation regarding the prevention of major accidents through offshore petroleum operations in EU waters, including environmental concerns. Whereas the North Sea countries had overhauled their legislation in the period 1982 to1992, other Member States had relatively undeveloped regulatory systems, with the exception of Italy.

The Directive requires regulators and industry stakeholders with duties relating to the protection against accidents in offshore petroleum activities to undertake all suitable measures to:

·Prevent a major incident from occurring during adjacent offshore oil and gas activities 9 (relating, in particular, to mechanisms to control major accident hazards); and

·Provide affected coastal states with measures for effective response to and remediation from a major emergency, should preventive systems fail.

The following figure summarizes the intervention logic, illustrating how the Directive was intended to work.

Figure 1: Intervention logic of the Offshore Safety Directive

Whereas the Directive has a unique focus on the safety of offshore operations and the avoidance of major accidents a complex web of EU legislation, international conventions and protocols regulate and frame the area and the way how the offshore sector operates. Part IV of the Annex provides an overview on legislation and conventions applicable.

2.2Baseline and points of comparison

The chapters below summarise the baseline situation, at the time of coming into effect of the Directive on 19 July 2013, and the main problems faced at that time.

2.2.1Problems related to industry evolution

The offshore oil and gas industry in the EU, and globally, had been facing significant changes in its operational environment. These challenges persist and are driven by three key issues. Firstly, ageing infrastructures related to many of the industries traditional operations, secondly, structural shifts towards smaller specialist companies, thirdly, discoveries of new hydrocarbon reserves in complex environments.

·Ageing infrastructure and maturing industrial environment

The industry was and continues to be, increasingly reliant on ageing installations, often in service well beyond their original design lifetime. One reason is that new technology has enabled mature installations to continue to access oil reserves that would otherwise have long been stranded.

In the UK, more than half of the fixed platforms had exceeded the original design life of the field 10 . The situation is similar for Italy in the Mediterranean. The consequence of the passage of time on the integrity of structures and process equipment is that challenges accrue for the maintenance of reliability. The costs of these challenges were compounded by declining profit margins as production rates in these fields decline.

·Structural shift of the industry towards diversification

Ageing platforms and declining reservoirs often led their primary owners to divest these assets into smaller, specialist oil companies who have low overheads and are in the business specifically for these low yielding operations. This can lead to a loss of corporate memory concerning the operation of the installation, thus posing a potential safety risk.

This was prevalent in 2011, but the involvement of smaller companies is, however, not inherently undesirable as they generally operate with a shorter decision chain for expenditure (including safety-related). On the other hand, smaller companies often have limited in-house resources (e.g. for well design), and their emergency response capabilities are usually less than those of the larger, original operators who developed the installation.

·Shift to "frontier" operations and new technologies

The scarcity of new discoveries of large, conventional reservoirs had, around the turn of the century, directed the industry to explore more challenging frontier environments. These include high-temperature and high-pressure (HPHT) reservoirs, and reservoirs in hostile climatic conditions, in deep water, or in geographically remote locations. For example, in the North Sea the majority of operations had been at depths of 200 to 300 metres, whereas new projects in 2011 were operating as deep as 1,700 metres 11 . Similarly, in the Mediterranean and the Black Sea, there was a trend towards expanding offshore activities into more distant areas, partly in deep water. New players were coming into the eastern Mediterranean and Black Sea regions.

2.2.2 Problems related to company-specific corporate practice

Besides the drivers that are common to the industry as a whole, level of risks in the offshore sector are impacted by the practices and behaviours of individual companies. Two main types of drivers are distinguished here: one type related to the level of use of best available technology and practices, the other reflecting the degree of compliance with the regulatory framework. The latter is often related to the existence of a strong safety culture within a company (or absence thereof). These factors are described in the three sections below.

·Inconsistent use of state of the art practices and technology

Inconsistencies amongst offshore operators were identified in the degree to which operators and owners focused on major accident preventive systems and systemic corporate responsibility. There was an uneven focus on individual responsibility, and occupational safety compliance 12 . Despite progress in this area, greater divergence of practices were to be expected in the absence of a consistent template for industry and regulators. The reason for this was that a greater number of players were expected to engage in offshore exploration and production, bringing their own corporate approaches.

·Failures of compliance with rules and standards

Investigations of offshore incidents frequently found that whilst the planned measures were indeed appropriate to prevent critical events, operators did not maintain or follow them. According to available reports, this was clearly evident in the Deepwater Horizon and Montara 13 accidents. Achieving consistency between plans and actual performance is dependent on the degree of compliance with the national regulatory framework and the internal operating rules and procedures within a company. These rules and procedures are designed to comply with the regulatory requirements and often go further than is legally necessary. Nevertheless, if they are not properly adhered to, they cannot support the prevention of incidents.

·Inadequate safety culture

Within an organisation, the degree of compliance with external and internal safety rules is directly related to the degree to which safety is prioritised as a standalone corporate value and an integral part of the business model. This is often characterised as a strong "safety culture" 14 . Gaps in safety culture significantly contributed to the Deepwater Horizon incident. Reports by Member States and professional bodies active in offshore operations in the EU agreed that those behaviours were having global impact, including in other European companies. Analysis showed that levels of enforcement in the strongest EU regimes had been broadly constant for the previous 10 years 15 .

2.2.3Problems related to the regulatory framework

The level of safety and prevalence of residual risks in the offshore sector is determined not only by industry practices but also by the quality of the regulatory environment and the oversight enforced by the competent public authorities. Several aspects of the existing EU regulatory environment were deemed to adversely affect the industry's management of risk in offshore oil and gas operations. These are described in three sections below.

·Uneven technical expertise amongst regulators

Various Member States responded to the accident at the Deepwater Horizon drilling rig in the Gulf of Mexico, which happened in the Macondo 16 area (Mississippi Canyon block 252, offshore Louisiana, Gulf of Mexico, USA) by evaluating national regulatory systems 17 . Their initiatives showed that national regulatory practices vary. While this inconsistency does not necessarily mean that the regimes were per se ineffective, the variable degree to which national regulators balanced the attention given to major hazards and to occupational safety factors in their assessments and inspections influenced the behaviour of industry accordingly.

National regulators play a role in verifying that operators correctly account for the safety and long term integrity of their undertakings. It is the regulators that need to provide adequate supervision and guidance to the industry in all relevant EU waters. To achieve this, regulators need to have access to expertise to underpin their interventions and judgements. This was determined in 2011 to be problematic, especially in cases where Member States have only a handful of offshore installations.

·Suboptimal transparency and sharing of information

Reports on industry performance are most authoritative when prepared by the regulator based upon statutory submissions of the duty holder. Good initiatives existed between some Member States and within some regions for information and experience sharing between regulators. However, there were clear differences in the extent to which key safety information was acquired and shared across EU borders, and to which adequate public assurance concerning the integrity of offshore activities was provided. At the time, there were no EU-wide mechanisms for sharing intelligence or for convening regulatory forums, including relevant adjacent regions. Gaps existed in the quality of data in terms of regional coverage (no EU-wide/global data), in terms of comparability (different formats, indicators etc.), and in terms of lack of precision (e.g. data from some industry databases were fully anonymised and narrowly focused). These shortcomings were conspicuous in contrast to arrangements in other high risk industries such as aviation or the chemical industry.

There was also a notable inconsistency in the way relevant information was made accessible to the public. Most national regulators make available information concerning breaches of law (prosecutions, the issue of enforcement notices) either through publishing lists, or having registers that can be viewed by the public. Such enforcement reports give an incomplete picture, however, and are not comparable between jurisdictions. At the time of preparing EU-wide legislation, some regulators published annual reports of safety performance in their offshore jurisdictions. In view of the EU as a whole, there was no common system to provide the public with easily accessible and comparable information on the offshore activities of companies and their regulators in all EU regions/ Member States.

In summary, the benefits of transparency in encouraging key learning and continuous improvement across the EU were being missed. Complex procedures for accessing information were hindering the development of new research and reducing inter-state pressure for the deployment of state of the art safety practices.

·Fragmented regulatory framework

International law covering offshore exploration and production is, much less comprehensive than in maritime transport, and mainly deals with rights of access to reserves in adjacent seas 18 . Therefore wide differences exist in how the sector is regulated around the world. For example, some European Member States and some other countries (Canada, Brazil, Australia and New Zealand) had adopted a goal setting regime, whilst other influential countries had not 19 . Some countries had a more prescriptive regulatory regime whilst others had no discernible safety regulation.

Discrepancies between different regulatory regimes lead to considerable variations in costs for the industry. For example, in countries that rely on self-regulation, industry can decide to deploy rigs and equipment that would not be permitted in the North Sea. Conversely, high integrity operators and MODU owners may be inclined to maintain North Sea standards throughout their operations, this was by no means universal. In such circumstances, the EU had an interest in adopting measures to encourage a global level playing field with suitable standards of performance. One clear example of this interest is that Member States can be directly affected by incidents in adjacent, non-EU waters. Achieving a consistent EU approach to offshore safety and environmental protection would clearly be a great assistance for the EU to promote higher standards beyond the Union’s footprint.

In addition, no Member State had developed a holistic, independent, single offshore regime that encompassed major hazards to both humans and the environment, and that took account of civil and economic liabilities. Whilst the risks arising from oil and gas activities are broadly similar everywhere, the national institutions and arrangements in the EU-28 20  varied considerably.

2.2.4Problems related to the state of risk-based planning

Whilst preventing major incidents should remain the primary focus, the risk can never be entirely removed, and therefore provisions need to be present to ensure a suitable and sufficient response in the event of a major incident. The factors that make escalation a higher risk than necessary are: inadequate risk assessment in emergency plans, lack of joined-up responsibility for response (failure to maximise the resources available), and incompatibility of physical assets and expertise for intervention in an incident.

The contemporary regional arrangements for risk based maritime response planning across the EU were not optimal, vis-à-vis ensuring oil and gas activity is properly considered. Both, regions such as the Mediterranean and the North Sea were developing a similar approaches. At the time, there were EU-wide coordination schemes and EU-level instruments like the Civil Protection Mechanism which played an important role in the coordination of emergency response, and provided information on the availability of public resources for emergency response.

The two underlying drivers for this issue are further highlighted below.

·Inconsistencies in emergency planning between Member States

The external emergency plans (those pertaining to a national emergency) also depend on the adequacy of the initial risk assessment by the operator. Therefore, the same concerns must apply to preparedness for a national scale offshore incident as for a localised 'internal' incident in some regions. In addition, a national scale emergency will require the deployment of national assets, coordination by national representatives, consideration to adjoining Member States and others, and the support of EU marine contingency organisations such as EMSA (European Maritime Safety Agency). Some Member States were cooperative with their neighbours on emergency planning, particularly where risk based regimes facilitated the development of site specific risk based scenario planning.

It was shown to be necessary to coordinate the essential environmental sensitivity data relating to the state of the water column and the seabed so that the correct responses could be planned if an emergency arises. At the time, this data was not consistently collected and collated throughout the EU.

·Cross-border incompatibility of response assets

Industry responded with resolve to the Deepwater Horizon incident by actively researching means of dispersing major spills as well as multi-functional devices for capping damaged wellheads. This was commendable and encouraged to continue. Nevertheless, this incident illustrated the scope of the response required to manage a disaster of this scale. Including not only the operating company and national civil contingency, but indeed the efforts of the entire industry and the combined resources of all adjoining countries.

On the matter of compatibility of the response equipment and services, only the immediate response tools need be available at the site of the accident, or in close proximity. Other necessary equipment may be available at a distance, even if it is in a different continent. The identified need was for the rapid transportation of equipment that can be connected to locally available equipment and which may be handled using available lifting and transport systems. This applied also to human expertise.

2.2.5Problems related to the integration of public and industry emergency plans and assets

The maritime safety and response arrangements in the EU provided for joined up planning and intervention in a maritime emergency, including for pollution incidents. Compared to this benchmark it became clear that the offshore oil and gas sector could attain a greater degree of joined up planning between Member States than was evident at the time, taking the EU as a whole. This is especially important given that the capacity of the offshore oil and gas sector to cause pollution is many times greater than any single shipping incident. Given the specialised nature of the offshore sector as a sea based factory environment and not a shipping sector, maritime standards were not fully adequate and therefore the risk of a major incident escalating further than necessary remained an issue. The specific drivers for this category are discussed below.

·Lack of information on industry emergency response inventories

In order for the national emergency response plan to be effective, it was essential that the plan account for all emergency response assets and inventories that could be made available at the start of and during a major incident. As such, this would ensure the coordination of assets and inventories required for the incident to make effective and efficient use of all available resources.

Before the Macondo incident, there were indications of insufficient coordination of assets between industry and national authorities, often resulting in ad hoc responses. After the Deepwater Horizon incident, the oil and gas industry reviewed and in certain cases extended and increased their response inventories. National authorities dealing with emergency response of some of the Member States (mainly the countries around the North Sea) were involved in this process, which rectified the coordination deficits to some extent. However, this was seen to be insufficient to remedy similar issues around the Mediterranean and Black Seas.

·Consistency in the quality of company emergency plans

Analysis of the Deepwater Horizon incident revealed shortcomings in the preparedness of the companies involved, both in the initial response and in the race to cap the well and contain the spilled oil. The report of the US Coastguard was instructive that in spite of the obvious potential scale of the pollution and the challenges of ensuring a good prospect of survival of the personnel, the risk assessments and response plans were relatively modest. It was also found that major operators in the Gulf of Mexico were prone to copy-out similar emergency response plans rather than develop site specific plans based on proper risk assessments.

It was noted that the situation in the EU was different from the US, particularly where a risk based or goal setting regime was deployed such as the North Sea. Also, the EU had a long tradition of maritime response against which the provisions for the offshore oil and gas sector could be tested. However, emergency planning can only be as good as the risk assessment undertaken for the activity as a whole. The first responsibility would be to limit the consequences of an incident once it has occurred to the area under the control of the operator (i.e. the immediate vicinity of the rig or platform or subsea facility). Because such 'internal emergency plans' are a natural derivative of an effective risk assessment of the entire undertaking, and because only some Member States had a risk based offshore regulatory regime, it followed that emergency planning was, in some regions, inadequate to ensure rapid and effective response.

2.2.6Problems related to clarity and comprehensiveness of liability provisions

The operator of the Macondo license, BP, estimated the final outcome costs of the incident at $ 63bn. Very few companies could then or now accommodate such a sum, which would therefore leave the host country exposed to unwarranted financial risk. The insurance market cannot furnish an instrument that guarantees unlimited financial indemnity. In order to prevent liability transferring to the citizens of Member States in which the incident occurs some form of financial instrument would be required. In the UK the OPOL 21  scheme is a risk pooling instrument amongst licensees, but as the limit is set at $250m the arrangement is not sufficient in the extreme situations such as Macondo. However OPOL had evaluated that the $250m safety net was sufficient for all but the main outlying incidents This is a complex issue, and it is accompanied by the issue of how to make compensation available quickly to businesses and communities stricken by the effects of a major offshore incident such that they are prevented from failing (compensation that is paid too late to a community that is permanently damaged is not reasonable). The three drivers for this problem are discussed below.

·Clarity and scope of EU legislation on environmental liability

The Environmental Liability Directive (ELD 22 ) 2004 was not applicable beyond territorial waters (a distance of 20km/12miles from the shores). This was in line with the Waste Framework Directive 23 (WFD) 2000. However, the Marine Strategy Framework Directive 24 (MSFD) 2008 extended protection to all marine waters in Member States jurisdiction. This difference created an ambiguity in delineating which regulation was applicable in a given circumstance. For example, "water damage" only applied to inner and coastal waters, whereas current EU policy was to treat all EU waters as common good. Therefore this issue needed to be determined in the light of the review of offshore major incidents in the EU.

The status quo would have caused the consequences of a marine accident to continue to be limited to the Member State, in contradiction to the polluter pays principle. Also, during an extreme emergency the prevailing framework did not make it clear whether Member States could enforce compensation from the polluter for the deployment of national contingency assets.

·Lack of financial capacity guarantees

It was evident that not all Member States’ licensing authorities fully accounted for the capacity of applicants, who may be consortia, or joint ventures, to deal with the financial challenges of responding to a major incident. This was a missed opportunity to provide assurance of capacity and to reinforce to operators that their responsibility for the adverse consequences of offshore activity is without limitation.

·Inadequate compensation schemes for traditional damages

Even when the financial capacity of an applicant has been established by the licensing authority, there is no assurance that sufficient funds would be made available in time to settle third party claims. The funds made available in the event of a major incident would most likely be initially required for this incident itself (e.g. capping and containing the flow from a well). Without clear and unambiguous provisions to swiftly settle third party claims, local business and communities would suffer unduly the consequences of a major incident entirely without control or responsibility.

2.2.7Baseline costs of a major accident

The cost of accidents in the offshore oil and gas industry is related to the extent of undesired consequences of these accidents, namely:

·Injuries or deaths;

·Damage to equipment and facilities;

·Environmental pollution;

·Fines due to non-compliance;

·Lost work time and lost revenues due to installation down time.

Indirect impacts of accidents include:

·Legal costs and lawsuits;

·Effects on oil prices;

·Damage to offshore industry reputation;

·Effects on security of energy supply.

The quantification of all direct and indirect impacts of accidents is a complex undertaking due to the scarcity of comparable data. For this reason, the Commission’s Impact Assessment 25 covered only the two largest directly quantifiable categories of cost: infrastructure losses, and costs associated with the clean-up of oil spills. In this respect the results were considered conservative.

The annual cost of offshore accidents was estimated by the cost of the damages caused by such accidents, annualized over their recurrence time. The calculations of recurrence time, or of the frequency with which these accidents occur, were performed based on publicly available historical data 26 , with adjustments for trends. A detailed and complete account of the calculations can be found in Annex I of the Impact Assessment.

Two main categories of accidents were identified:

a)oil well blowouts; and

b)other major accidents (e.g. releases, fires and explosions, with multiple injuries or fatalities, total loss or severe damage to offshore units and/or environmental pollution).

The cost of an oil well blowout depends on the duration and flow rate of the blowout, i.e. on the amount of oil spilt into the sea. The main cost component here is the clean-up of the oil spill. The average per-tonne cost varied among different countries, ranging from Euro 2500 for UK to Euro 18500 for Norway. This brought the estimated average clean-up cost for an oil well blowout lasting for ca. 50 days to Euro 5 billion. This figure was the lower bound of the blowout cost, with upper bound being the cost of the accident, which was taken at the time to be Euro 30 billion. Therefore, taking note of Macondo accident, the blowout cost from one accident was estimated to be in the range Euro 5-30 billion.

The calculation of the recurrence period of an oil well blowout was based on historical data, which indicated a probability of 0.65 per year for a blowout of any type and duration to occur in European waters. Annualizing the blowout cost (Euro 5-30 billion) over the period of 35 years (dividing them by 35), gives an annual oil well blowout cost in the range of Euro 140-850 million. Added to this was the annual figure of Euro 65 million in property losses of less costly, but more common, major accidents.

The cost of other major offshore accidents, smaller but more common, reflect mainly loss in property. Taking into consideration case histories which indicated a range in costs from tens of millions to over Euro 1 billion, it was estimated at an average of Euro 50 million. Historical data from major accidents occurring in the North Sea in the years 1970-2007 indicated an aggregated rate of 2.6 major accidents per year, with a declining trend for the years immediately preceding 2011. Adjusting for this trend, the rate became 1.3 major accidents per year. This brought the annualized cost of major offshore accidents to Euro 65 million. Therefore the total annual direct tangible cost of offshore accidents in Europe was estimated at Euro 205-915 million. This was the baseline that the implementation measures of the Directive were intended to deal with.

3Method

3.1Short description of methodology

The baseline scenario described demonstrates potential safety concerns and shortcomings in the period before the Directive came into force; new legislation was supposed to address them. With reference to the experience of implementing the Directive and specifically with regard to establishing adequate levels of safety for offshore oil and gas operations, and environmental protection, by this assessment the Commission has verified whether:

·The main objectives of the Directive have been achieved and if not, whether the problem is one of implementation of the rules or with the rules themselves;

·Any gaps in legislation exist that have an impact on the level of safety in offshore oil and gas operations;

·Certain provisions of the Directive impose undue burden on Member States or the industry;

·The Directive has adequately harmonised the regulatory structure and level of safety across the EU offshore operations, proportionate to the activity levels of the Member States;

·The Directive is effective, efficient, coherent, relevant, and provides added value at EU level.

The Commission has carried out its’ analysis by using a broad range of information channels. To deal with the experiences of the Directive, both experts and the wider public were asked to contribute to the knowledge base. With regard to the expert input, the Commission focussed on the EUOAG 27 . Although the UK has left the European Union on 31 January 2020 the UK’s experiences and contributions to the knowledge used for the assessment are taken into account.

In a first step, the Commission consulted competent authorities in order to obtain feedback on their technical and regulatory experience of implementing the Directive. Secondly, the Commission consulted stakeholders represented in the EUOAG’s plenary meetings, which included industrial associations, unions, and NGOs. These meetings facilitated fact finding and thematic discussions on liability, handling of compensation claims, the financial security of operators and owners of installations, as well as a further stakeholder event, and several workshops. Data gathering from these diverse sources incorporated input from parties involved in the practical implementation of the Directive, and the handling of rules and legislation on offshore safety. Details on data collection and consultations are included in the annex (part I and II).

To complete the knowledge base, the Commission carried out a broad public consultation 28 , based on a comprehensive questionnaire targeting both the Directive and the Implementing Regulation on the reporting of accidents. All interested parties, e.g. private, business, public entities, were asked to provide views and comments.

Within the Commission, the relevant services contributed to the assessment actively in the framework of an Inter-Service-Group and a bilateral dialogue with the Directorate-General for Energy.

Both Member States and industrial associations have shared their views on the assessment of the Directive with the Commission, and NGOs actively contributed to the discussions. The assessment has taken this information into account in the context and comparison with the Directive’s objectives, as established in the Impact Assessment from 2011 preceding the adoption of the Directive. Furthermore, for the years 2016, 2017 and 2018 quantitative information on the safety performance of the EU offshore sector as a whole or in individual Member States is available, in the form of Commission annual reports 29 . This information in combination allowed for conclusions to be drawn on the assessment criteria of effectiveness, efficiency, coherency, relevance and value-added.

Through this methodology the Commission attempted to incorporate the perspectives of a representative range of stakeholders. Firstly, the assessment considers the experience of Member States with the implementation of this Directive. Secondly, through the stakeholder consultation, the experiences of competent authorities enforcing the Directive’s provisions are accounted for, in addition to owners and operators of offshore oil installations working within the national legal frameworks. Thirdly, the methodology also collected and analysed the views of parties not directly involved in these activities, for example citizens and NGOs.

3.2Limitations and robustness of findings 

Member States were obliged to implement the Directive by 19 July 2015. However, additional transitional periods for applying laws, regulations and administrative provisions in Member States, following the implementation of the Directive, ended only on 19 July 2018. Therefore, so far the Directive had a full impact on the safety of offshore oil and gas operations only for a relatively short period of time.

Although the Directive requires implementation by Norway – the Directive is EEA relevant - Norway did not take steps to comply with this legal obligation. The Commission could not persuade Norway to change its negative stance; accordingly the EEA committee may work on a solution to settle this dispute.

As a former Member State, after Norway the UK is the most important producer of offshore oil and gas. It contributed constructively to the design and drafting of the Directive, which it implemented in a very satisfactory manner. Since the assessment and implementation report shall analyse the experiences with the Directive and shall cover the years from the adoption of the Directive until recent days, and the UK has been a Member State during this period, it was included in the assessment. Depending from the final Treaty between the UK and the EU, it is unclear whether the UK may apply at least some parts of the Directive’s provisions.

Despite the loss of more than 70 % of the EU’s indigenous offshore oil and gas production due to the departing UK, the Directive remains of outmost importance for the safety of installations in the North Sear, the Baltic Sea, the Mediterranean and the Black Sea.

Due to consultations with stakeholders concerned, the assessment is rich in qualitative information. This information includes: anecdotal evidence, commentary supporting assessment of the themes, assisting determination of the efficiency, effectiveness, coherence, relevance, and EU-added value in implementing the Directive in the context of the original design intent.

The analysis incorporates data to establish a North Sea performance benchmark, based primarily on trend data published by the UK. From international data Europe can be placed as a regional performer, but doubts persist as to the completeness of international reporting on a voluntary basis.

The Commission established three reports, for the years 2016, 2017 and 2018, on the safety performance of the EU offshore sector, based on reporting templates of the Implementing Regulation. Taking also note of data from the global operators’ association (IOGP) and the UK the assessment attempts to establish trend data.

Regarding the financial cost of implementation, it does not appear that there has been a calculation by operators or regulators of one-off costs of implementation and uplift of running costs against which we may compare the estimate in the Commission’s Impact Assessment. North Sea Operators and some regulators have claimed, anecdotally, that start-up costs have been excessive, but the organisations concerned have not investigated the data to support their claims.

There is some data from south-east Member States that have introduced the regime as virtually a starting point for regulation in this area, providing no insight into uplift of prior running costs, nor one-off costs. Furthermore, data is provided by 34 of the 37 North Sea MODU fleet from which introductory costs can be identified. These are relatively modest, in line with expectation that the change in operational requirements are themselves relatively modest in the North Sea region.

At this stage there is insufficient data to differentiate incident performance between Member States, and to compare with the baseline. In the coming years new data will allow for the establishment of trends in EU offshore safety and to compare them with the situation before application of the Directive.

Currently however, it is not possible to estimate the risk of a major polluting blowout in EU waters following the application of the Directive, nor to compare it with the baseline calculation in the Commission’s 2011 impact assessment.

Not all initial suggestions and proposals required a follow-up. For example, it appeared that cyber security at offshore installations do not require more specific measures than other industrial sectors, and that horizontal legislations provides the necessary legal frame.

4State of play and implementation

4.1The offshore oil and gas sector

4.1.1Offshore operations and the Green Deal

End of 2019, the European Commission published the “European Green Deal” Communication 30 , with the objective to reset the Commission’s commitment to tackling climate and environmental-related challenges that is this generation’s defining task …”.It is a new growth strategy that aims to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in the year 2050; economic growth shall decouple from the use of resources. It also aims to protect, conserve and enhance the EU's natural capital, and protect the health and well-being of citizens from environment-related risks and impacts”. The European Green Deal also introduces the “green oath to do no harm” principle.  As part of this strategy, the European Commission intends to assess EU legislation – that includes the Offshore Safety Directive - to bring it in line with the objectives of the Green Deal. .

The offshore hydrocarbons industry has, by virtue of the Green Deal, a clear instruction to further improve its environmental performance within the EU. Operators and Member States alike are now expected to suggest and implement more ambitious means of reducing their environmental footprint. These may include large-scale approaches ranging from examples such as carbon capture and storage (CCS), to facility-specific measures like increasingly stringent targets for offshore flaring, as well as other more novel solutions.

The Offshore Safety Directive is concerned with the prevention and management of major accidents, which – if they occur – are typically comprised of both safety and environmental aspects. For example, an accident that results in injuries or fatalities to offshore personnel may also be responsible for a release or spill of hydrocarbons into the environment. The Directive is a tool for nudging operators and Member States, also via industry and EU fora, towards more sustainable environmental practices.

As the transition to a low carbon economy occurs, personnel safety will continue to be a priority for society and there is hence little doubt of the continuing relevance of the Offshore Safety Directive for Member States with an upstream hydrocarbons industry. In an era in which operators strive to make the most of ageing assets this must certainly be the case. However, regardless of the level of activity occurring within the sector at any given moment, a comprehensive, risk-based and functional Directive is considered a minimum requirement for ongoing high EU safety performance.

4.1.2Offshore Safety and COVID-19

The COVID-19 viral pandemic of 2019-2020 brought about unprecedented global change in terms of societal adaptation to new health and safety issues, cross-border and domestic mobility restrictions, and social and cultural norms. While the long-term effects of this pandemic are still being evaluated throughout the EU and elsewhere, and although the scale of economic impact is yet to be fully realized, a number of immediate repercussions within specific sectors are clear, including in the offshore hydrocarbons industry.

One important impact of the crisis on the industry was that the price of crude oil fell significantly in a short time, taking billions off the stock prices of major oil and gas companies. This left many offshore projects in doubt due to their vulnerability in what is typically a higher operating cost environment. For existing facilities this meant trying to achieve required output without adding new infrastructure, while for planned projects cancellation or suspension were preferred, pending market stabilization.

In the early days of the pandemic, understanding the spread of COVID-19 was challenging, leading to varied approaches by individual Member States and industry to limit its spread within their own contexts. For the offshore industry, an immediate concern was preventing infections in a workforce with personnel commuting from a wide geography. This brought with it several implications, not least of which was ensuring personnel could be tested for the virus and their health status tracked.

As offshore facilities have limited space and hence potential for higher infection risk, interim strategies were adopted to try to reduce this risk. One example was “minimum manning” whereby Operators limit the number of personnel offshore by temporarily deferring non-essential tasks. On some facilities, workers were also requested to remain offshore for longer shifts, to limit the risk of infection brought about by the arrival of any new personnel. Such strategies could be considered a stopgap rather than a long-term sustainable strategy.

In the event of a drawn-out crisis, Member State Competent Authorities have an increasingly important role in ensuring that offshore strategies adopted by operators do not compromise safety. Although the Offshore Safety Directive was not developed with a pandemic such as COVID-19 as context, it is nevertheless considered fit-for-purpose in this situation. It provides meaningful steer on how Competent Authorities may adapt to ever-changing circumstances, including a focus on risk management approaches, key roles and responsibilities and reporting requirements.

It is to consider whether the Directive in light of COVID-19 is warranted to strengthen its remit, or for considering renewed policies relating to different ways of working offshore and throughout industry. With regard to national rules and legislation that are implementing the Directive, Member States may identify potential amendments extenuating circumstances as a viral pandemic.

4.1.3Oil prices, investments and offshore safety

The first quarter of 2020 began with a gradual fall in the world crude oil price following the outbreak of the COVID-19 virus in China. The global market viewed the virus as likely to affect oil demand, and the Organization of Petroleum Exporting Countries (OPEC) subsequently met to negotiate supply cuts. Due to the unstable nature of these negotiations against the backdrop of an ongoing pandemic, dramatic price falls ensued leaving parts of the hydrocarbons industry facing unsustainable operating costs.

Fluctuations in oil prices are not uncommon, the most recent substantial falls having occurred in 2014, also because of market oversupply. The effect on the offshore industry at the time was similar, with many unviable projects cancelled or suspended, and major cost-cutting exercises implemented amid significant industry consolidation. The lessons from this period are perhaps useful in the current crisis, particularly with respect to the challenges faced by operators of reducing operating costs without compromising safety.

In order to ensure high safety performance, close links between company safety strategies, their implementation, critical spending decisions and appropriate performance indicators are required. Previous surveys conducted within the offshore industry indicate that many feel industry cost reductions have an inevitable impact on safety performance. However, it is also true that major operators tend to set high standards for safety and have active programs in place to embed the values of their Safety Management Systems within workforce culture.

Going forward, the mandate for applying the Directive as implemented by Member States is as strong as ever, particularly when the global industry is in a state of flux. The Directive stands as a benchmark for rules and legislation in Member States, which ultimately push companies towards better safety and environmental performance. Equally clear is the remit of the EU and competent authorities working closely with operators to provide them with the best advice and to facilitate continuous improvement in all of their offshore activities.

Looking back to recent years and summarising the prospects and ambitions of the petroleum sector in European waters, there was a sharp decline in exploration activity and capital expenditure for the development of production throughout the period of implementing the Directive (2014-2018). This change was caused by a fall in crude oil prices from $110 down to $30 per barrel. Since 2016 but only until February 2020 when oversupply and the impact of the corona virus hit the oil markets, a ‘new normal’ price has stabilised at ca. $65 per barrel. The sharp decline of oil prices in the first and second quarter of 2020 threatens the business model of EU offshore oil and gas production and may lead to the closure of production sites due to the operation’s lack of profitability.

Looking forwards from 2019 and 2020 there appears to be a confidence in (i) the critical mass of expertise in the region, (ii) the proximity of the consumer base for natural gas, and (iii) new petroleum basin prospects. Due to the vast consequences of the spread of the corona virus, the expectation is therefore negative for growth, particularly in the North Sea and North East Atlantic, but less negatively pronounced for the southern offshore sectors. In the Mediterranean benefits are derived from the experience in cost reductions and efficiency gains achieved in the North, as well as developments in technology that enable more reliable identification of petroleum reservoir prospects in southern EU waters.

Before the spread of the coronavirus and the economic decline, the UK, Netherlands and Denmark were projecting capital expenditure of $20bn, $1.5bn and $1bn respectively in their offshore sectors by 2025. Even without the economic downturn that started in the first half of 2020, overall, growth was expected to remain slow, incremental, and fragile due to much cheaper sources of oil and gas in the Middle East and onshore USA (from shale deposits).

4.1.4The European offshore sector 

Eight of the ten largest European oil and gas fields are in Norway, and two are in the UK, jointly producing 13.3 billion tonnes of remaining oil equivalent. In 2019, the UK alone produced 72 % of EU offshore oil and gas. After the withdrawal of the UK from the EU on 31 January 2020, both the most important EU producers of offshore oil and gas are Denmark, the Netherlands and Italy. The operators and main co-ventures comprise the super-major oil companies: Exxon Mobil, Shell, BP, Total, Chevron, Equinor, and Conoco Phillips. Large oil companies are also present: Lundin, Petoro (100% owned by Norway), Suncor, INEOS, CNOOC (China), Idemitsu Kosan (Japan), Wintershall DEA, and Eni.

Third country companies are purchasing an increasing share of European oil and gas production with Chinese companies most predominant. The Italian Adriatic is the major offshore active country outside the North Sea, with Eni predominant, others include: Edison and Zorh.

The following table illustrates the distribution of off-shore oil and gas production in the EU, based on the annual Commission report on offshore safety published in 2018 31 . 

Figure 2: Offshore oil and gas production in the EU in kilotons of oil equivalent (ktoe), source: Annual Report on the Safety of Offshore Oil and Gas Operations in the European Union for the year 2018.

* All petroleum: crude oil, condensate; natural gas; kilo tonnes oil equivalent; no offshore production: CY; FR; MT; PT

Of the 112 million tonnes (ktoe) produced in EU countries in 2018, the main contributor is the North Sea (UK, Netherlands and Denmark) but Italy is also significant.

Looking back to decades of EU offshore oil and gas operations, the following table recalls the entry of operation of installations in EU regions from 1950. Figures underline a clear downward trend in new installations from the year 2010 onwards.

Figure 3: Number of installations present in EU waters, by decade of entry into operation and by region, source, Annual Report on the Safety of Offshore Oil and Gas Operations in the European Union for the year 2018.

4.1.5Incident rates and safety performance

The Commission assesses the safety of the EU’s offshore oil and gas operations based on the data provided by Member States in accordance with the provisions of the Implementing Regulation on reporting. Accordingly, the accuracy of the Commission’s assessment depends on the information submitted by Member States.The table below provides a snapshot of incidents by categories in line with the reporting requirments set out in the Directive and its Implementing Regulation.

Figure 4: Incidents by categories (Annex IX of the Offshore Safety Directive, EU level), source, Annual Report on the Safety of Offshore Oil and Gas Operations in the European Union for the year 2018.

In its report for the year 2018, the Commission concluded: “As in 2016 and 2017, no fatalities were reported in 2018 but 10 injuries and 17 serious injuries occurred. According to the reports of competent authorities, the number of accidents significantly increased in the United Kingdom, which requires both an in-depth analysis of causes and follow-up measures by the competent authority. The Commission will seek cooperation with the United Kingdom to bring the safety performance level back to that of recent years. Apparently, following a high level of safety in 2016 and 2017, maintaining an adequate performance of safety requires additional efforts.

4.2Implementation of the Directive by Member States

The Commission has assessed the transposition of the Directive by Member States and has found that the overall level of transposition was adequate, although the integrity and quality of implementation across the Member States varies significantly. Member States presented different approaches for the implementation of the Directive (either in full or in relation to specific provisions). Some Member States have adopted new legislation that transposes the provisions of the Directive, whereas others have amended existing legislation and included the transposition of the Directive’s different provisions into several pieces of legislation. Certain Member States have largely literally included the provisions of the Directive in their national law, while others have partly or fully adapted the wording of the Directive with the intention to convert it better into their specific legislative culture.

Drawing attention to specific parts of the Directive, it appears that the implementation of the principles of risk management is satisfactory. Furthermore, most Member States did completely and correctly transpose the rules on the submission of major hazard reports. The same is true for the provisions on the internal emergency response plans and the schemes for independent verification. The overall level of implementation of rules for co-operation between Member States was very comprehensive. Provisions on public participation and involvement in planned offshore oil and gas operations were implemented in a satisfactory manner. The Directive’s Article regarding the liability for environmental damages was correctly transposed.

Almost all Member States did correctly transpose provisions on confidential reporting of safety concerns, for example by workers. The same is true for Articles on the sharing of information between owners, operators and competent authorities, and the establishment of rules for investigations following major accidents.

In contrast, some Member States had difficulties in setting up effective criteria for the assessment of the technical and financial capability of an applicant for a license. Denmark provides an example of a very good implementation of this part of the Directive. In some Member States there are weaknesses of transposition regarding external emergency response plans and emergency preparedness. With regard to the obligation of Member States to establish effective proportionate and dissuasive penalties applicable to infringements, further analysis is necessary to determine whether this part of the Directive was adequately implemented. Despite the formal implementation it remains unclear whether penalties are effective, proportionate and dissuasive in the individual social, legal and economic framework of Member States that are active in offshore oil and gas production.

Regarding the set-up of Competent Authorities, Member States did less closely implement the provisions (e.g. public availability of information, providing adequate human and financial resources) than expected. The Commission services are in contact with several Member States to clarify the rules for the functioning of the Competent Authority. Additional information on the assessment of the Directive’s implementation by Member States Article by Article provides the Staff Working Document in its Annexe IX.

Annex III includes detailed, additional information on the implementation of the Articles of the Directive, which highlights shortcomings. The dialogue with Member States is an ongoing process. If necessary, in order to achieve improvements and a fully adequate level of implementation the Commission may start infringement proceedings in case of severe shortcomings.

Technology is constantly developing, however, without major technological pushes. Improved shelter booths and detection devices, supported by artificial intelligence, are deployed on offshore installations. Following the Commission’s analysis of safety performance as published in the annual reports, offshore safety performance appears adequate in all Member States.

Member States with offshore waters that do not have offshore oil and gas operations under their jurisdiction (e.g. Belgium, Estonia, Finland, Latvia, Lithuania, Portugal, Slovenia, Sweden), and which do not plan to license such operations shall implement only those measures, which are necessary to ensure compliance with Article 20 (operations outside the EU), Article 32 (transboundary emergency preparedness) and Article 34 (penalties). In general terms, these Articles were adequately transposed.

In line with the provisions of the Directive, landlocked Member States, e.g. as Hungary, Austria, the Czech Republic and Slovakia, adequately implemented Article 20 of the Directive.

5Achievements assessed by themes

5.1Overview on the themes analysed 

The assessment has been structured around themes that each bring together several Articles from the Directive and issues proposed during consultations with stakeholders, the public and experts. The majority (10) of themes concern the functionality of the Articles in the Directive. The next largest category (3) emerge from stakeholder representation on issues only indirectly related to functional Articles. Two themes derive from direct mandated actions in Article 39 (liability, compensation claims, financial security and criminal sanctions). An assessment matrix served as data and information tool for analysing themes and for concluding on the Directive’s achievements measured by criteria (see annex. Part 4, specifically table 4).

Figure 5: Overview of themes subject to the assessment

5.2Applying risk management principles for control of major accidents

The foundation of risk assessment in major hazard sectors is the identification of all foreseeable hazards, and the assignment of scale of harm or the consequence of the hazard being realised (see also Article 3 of the Directive).

Both industry and authorities observed an occasionally inconsistent use of risk assessment by both operators and regulators as the precursor to a decision on suitability of control measures for identified major hazards. The historical concern of risk assessment is that methodology may be directed to achieve a preferred outcome, for example, deliberately selecting a statistical assumption in the risk calculus that gives a bias in the result.

However, there is no statistical evidence that bias is widespread or frequent. The provisions in the Directive directly attempt to mitigate bias in the areas of: independent verification of safety, environmentally critical elements, and well plans. In addition, the expert and independent competent authority’s assessment of the operator’s or owner’s risk assessment report for the installation (Report on Major Hazards or RoMH) 33 is a further control against bias in risk assessment.

There is a reported inconsistency when the condition of ‘risks tolerable and as low as reasonably practicable (ALARP)’ is achieved. This may result in disagreement between the operator or owner of the installation and the Competent Authority, regarding the adequacy of the risk assessment presented in the installation RoMH. Alternatively, there may be agreement between the operator/owner and the competent authority where the ALARP condition may not have in fact been achieved: this can be the case where the competent authority fails to undertake a thorough, expert assessment of the RoMH.

Linked to the matter of inconsistency in identifying the ALARP threshold in complex risk assessment, are reports that risk assessment measures adopted by Member States are insufficiently stringent. This is a generic concern that applies to different forms of intervention, such as the threshold for taking enforcement action.

Although there is no statistical data that supports these concerns, it appears that there is inconsistency in applying risk assessment methodologies between Member States. Since the legal instrument bringing the measures into effect was a Directive, different approaches were anticipated because most of the 16 focal Member States are relatively unfamiliar with risk-based regulation.

Accordingly, upskilling of Member States unfamiliar with risk-based regulation may provide substantial added-value. Joint peer reviews carried out by smaller competent authorities from the North Sea and Italy may reveal where weaknesses persist.

Civil society needs assurance that industry has improved its control of major accident hazards. Former North Sea joint audits 34 , for example from the North Sea Offshore Authorities Forum (NSOAF), demonstrated that there is room for improvement. Taking note of their contribution to offshore safety, the methodologies deployed in the North Sea joint audits could be usefully transferred to the Mediterranean and Black Sea regions, and the results published by the EUOAG.

According to the views of workers unions, efforts may be needed by employers to upskill their field staff. Unions argue that worker representatives in particular should reserve more input time, to contribute both more confidently and more comfortably to the formulation of the installation’s RoMH.

Finally, according to views received from experts, risk assessment and management should take note of climate change. Predictions suggest that in the coming years and decades, climate change may lead to extreme heat, stronger winds, and higher waves. To adequately address these risks, safety and environmental critical elements at installations may require adjustments.

5.3Public participation in release of new areas for licensing

Environmental assessment is a procedure that ensures environmental implications of decisions are taken into account before the decisions are made. Environmental assessment can be undertaken for individual projects, such as a dam, motorway, airport or factory, on the basis of Directive 2011/92/EU 35 (known as 'Environmental Impact Assessment' – EIA Directive) or for public plans or programmes on the basis of Directive 2001/42/EC 36 (known as 'Strategic Environmental Assessment' – SEA Directive). The common principle of both Directives is to ensure that plans, programmes and projects likely to have significant effects on the environment are made subject to an environmental assessment, to provide a high level of protection of the environment and to contribute to the integration of environmental considerations into the preparation of such projects, plans and programmes with a view to reduce their environmental impacts, prior to their approval or authorisation. Consultation with the public is a key feature of environmental assessments.

The provisions of Article 5 of the Directive for public participation apply to new areas for licensing from 19 July 2013. These areas are regions in the sea anticipated to be utilised for exploration and production. Article 5 should prevent drilling, including explorative drilling unless the public was consulted and the results of the assessment accommodated. Paragraph 2 (a) to (f) describes minimum suitable arrangements to achieve the aims. According to information provided for the assessment by NGOs, it appears that Member States have taken due note of these aims of the Directive but did not always fully implement these provisions. The environmental NGO community has raised certain concerns, primarily directed at licensing and re-licensing in mature basins, which partially have been exploited for decades.

The practice that the Member States’ licensing authority may re-license a previously licensed area without recommencing the full SEA procedures and associated public participation, is not transparent. However, it has not been possible to collect data that demonstrates the approaches adopted in different Member States under the provisions of the Directive.

In general, there is limited public awareness of the offshore oil and gas sector in general, with its technology and functions scarcely understood. These factors may prevent the public from taking a deeper interest in consultations. Most citizens may not be aware of public consultations or may hesitate to participate, due to a perceived lack of expert knowledge. However, if stakeholders as NGOs, enterprises, local authorities carry out a campaign participation rates can substantially increase.

Taking note of national rules and legislation regarding public participation in Member States, the provisions for stimulating public consultation relating to offshore projects appear suitable. However, their practical application may require additional efforts from national administrations.

Member States may publish citizen’s guidance to facilitate access of citizens to the sector and to encourage their informed participation in consultation exercises. Furthermore, NGOs would welcome arrangements made by the Member States that ensure consultees can be confident that their views are processed effectively in decision making.

5.4Assignment of the Competent Authority

Whenever six or more installations operate in a Member State, according to Articles 8 and 9 of the Directive, Member States shall establish a Competent Authority to assure structural independence from economic interests (e.g. maximising revenues from offshore activities). The upward reporting chain, within which the priorities, strategies and work plans of the competent authorities are agreed, should be entirely separated from economic regulation.

It follows from consultations with stakeholders and NGOs that it is often not entirely clear as to whether or not suitable and sufficient independence has been attained in all competent authorities, following the formal implementation of the Directive.

Some respondents and interviewees from the industry have expressed a reservation that the intended unification of environmental and safety oversight by regulators is insufficiently joined-up compared to expectations, and that duplication of effort and an additional administrative burden results from this. However, even where the competent authority is not fully integrated, it seems that with the Directive, Member States are in a better position to avoid duplication of interventions and unaligned strategies, which may impact efficiency and costs of the sector.

The strong fragmentation of regulatory approaches around the EU, as explained in the Commission’s impact assessment, was a major driver to establish the Directive. It seems that systems and arrangements have been less harmonised than expected. This is supported by survey’s respondents and workshops. Therefore, whilst Member States may well have implemented the Directive in an appropriate manner, the process of harmonising the regulatory playing field in the EU remains incomplete. Therefore, the full benefits of inter alia, standardisation, efficiency, benchmarking, and effectiveness are unlikely to be realised, compared to the situation of adopting a common Regulation.

A number of respondents and interviewees, mainly from the industry, have reported that the organisational arrangements of some competent authorities remain unstable, and that the full depth of skills and expertise is yet to be integrated into the body of the regulator.

The Commission produced a report in 2016 concerning the adequacy of resources of the Member States’ competent authorities 37 to carry out their functions under the Directive. It noted that Member States were on average 10% under-staffed, recruitment was demonstrably difficult and that pay levels were often a root problem. The report called on Member States to ensure they provide sufficient resources to attract and train expert staff, relative to the size and complexity of the offshore activity of each Member State. It is also important to recall that such inconsistency and instability does impose administrative burdens on industry.

There is a lack of clarity concerning whether or not suitable and sufficient independence has been attained in all competent authorities. Given the importance of safety and environmental protection in the management of the marine space, the independence of judgement of offshore competent authorities is a matter of public interest. There is an ongoing dialogue between the Commission and the Member States in the framework of the European Offshore Authorities Group. In forthcoming sessions this Group may discuss arrangements for ensuring full compliance with Articles 8(2) and 9(a) of the Directive on independence from economic regulation, with the objective to provide more information to social partners and civil society. Competent authorities may specifically analyse the increased decommissioning of fixed installations.

5.5Functioning of scheme of independent verification for installations and wells

Major technical projects of high capital investment will be subject to independent verification by the project owner as a safeguard. The danger from not referring to independent verification is the adoption of unknown bias into project risk assessments.

The Directive adopted best international regulatory practice by requiring, in Article 17, the adoption of independent verification for installations and well plans within the safety management systems of operators and owners. The main provisions are:

·The system is to be integral to the operator or owner’s management system rather than a stage of compliance or permitting.

·The arrangements must pass strict tests:

oof independence of the verifier from any connection to the installation or well project; and

oof the integrity of the working environment of the verifier such that their work is free of influence from the operator or owner.

·The scheme is applied to verification of safety and environment critical elements (SECE’s) 38 and their continuing effectiveness in practice, and to wells including changes to design intent.

·The records are to be retained, and made available to the competent authorities on demand.

Most contributors to the assessment express approval of the conceptual system. The Member States active in offshore operations in the North Sea area (UK, the Netherlands, and Denmark) report a ‘significant advantage’ in their major accident prevention systems by virtue of the availability of the independent verifiers’ reports.

In contrast, there are also some concerns and misinterpretations of the various entities.

·Member States with decades’ long experience with offshore oil and gas operations (e.g. North Sea and Italy) and co-located operators found introduction of the scheme too difficult. This was due to independent verifiers’ market unreadiness, and lack of specificity in the requirements allowing numerous options.

·Some Member States’ Competent Authorities, and NGOs consider 2nd party verification unsuitable, either on an objection of principle, or because of potential societal aversion.

·Some actors (mainly from large verification-based vendors) favoured strict 3rd party verification but only using large players with extensive experience of independent verifiers’ services. They claim smaller, niche companies, lack capability in depth and become captured by the client. They also claim the Directive spawns an increase of niche vendors.

·The Trade Unions (TU’s) observe that there is insufficient depth of resources with all the relevant expertise and experience to underpin the introduction and proper functioning of the schemes.

·Other actors (the smaller niche vendors) warned of the large verification companies who may encourage homogeneous rather than independent approaches. They also warn of profiteering through standardisation of systems, irrespective of the individual nature of production installations.

·Some Member States consider that there is a lack of sufficient clarity in Article 17 and Annex V relating to the operation of schemes for independent verification, and ask for additional Commission guidelines.

According to the information obtained, it appears that the scheme of independent verification complies with the minimum requirements as set out in the Directive. To facilitate the handling of schemes in Member States, it would be useful to collect and disseminate all available guidance of industry and regulator.

5.6Safety in operations conducted outside EU

Analysis

Article 19(8) of the Directive establishes the principle that an operator’s or owner’s CMAPP 39 is to be the policy of the main board of the company and should apply throughout the organisation. Operators should be able to demonstrate this without ambiguity to their Competent Authority. The measure is in response to apparent and largely unexplained differences of performance of operators as measured by incident reports in different regions of the world.

Annex I Part 8 of the Directive provides the minimum components to be incorporated in a CMAPP, and these broadly reflect the worldwide standard for a high integrity organisation 40 . The components of the CMAPP address corporate behaviour such as process auditing, rewarding desirable behaviours for major accident prevention amongst staff, extemporising corporate goals, values and capabilities, and requiring high levels of competency throughout the organisation.

There are reports from duty holders regarding inconsistency of requirements by Member States’ Competent Authorities for the demonstration of the CMAPP in the set of productions submitted for assessment alongside the installation RoMH by the duty holder. There are further reports, also in the framework of stakeholder consultation, that the practical application of national laws transposing the Directive, via competent authorities, has included additional features that may be out of context of a CMAPP.

It has not been possible within the assessment of the Directive to verify these reports. In any case it would be necessary to take evidence from duty holders, which they may be reluctant to give. However, in the context of a CMAPP, there should by definition be only one version per company throughout its global operations. Any additional relevant requirements should be an addendum to the safety and environmental management system document (SEMS).

On the subject of the SEMS, it has been reported that some duty holders do not themselves identify the difference between the SEMS and the CMAPP. The relevant lists of content in the Directive for CMAPP (Annex I Part 8) and SEMS (Annex I Part 9) are distinctively different. If the distinction is not understood by a duty holder, or duplication arises from a Member State’s approach to the handling of, and the relationship between, the two documents, actors may not have fully understood the subject.

In the framework of the public consultation, the NGO’s have expressed particular concern on this point by issuing a joint statement:

“Companies registered in the EU should be bound worldwide by all Directive obligations that can be applied directly to operators. Allowing companies to skip Directive standards in developing countries does not sit well with the initial intention of avoiding a second Deepwater Horizon…/… In addition, the obligations already applicable for extraterritorial activities should be enforced in a consistent and transparent manner. At this point it is not very clear whether Member States do in fact ask for accident prevention plans covering extraterritorial activities, and even more so if and how they verify that that the plans are applied.”

Conclusions

The Directive may not always ensure effective accident prevention outside of the EU. However, further research and fact finding appears necessary before being able to draw a firm conclusion. Furthermore, the consistency between Member State provisions for assuring EU-based operators maintain high and equivalent standards in their overseas activities, is a topic that Member States might consider collaboration on. For example, in a management audit exercise for operations outside the EU. As a preliminary exercise, Member States may consider a joint audit to examine the mechanisms that Member States’ deploy for verifying operators’ effectiveness in examining joined-up safety management of their operators throughout their global operations. Safe offshore operations contribute to the protection of the environment and the fight against climate change. For example, by preventing large leakages of methane.

5.7Arrangements for worker involvement in major accident prevention

Analysis

The practice of tripartite consultation was already adopted by the International Labour Organisation (ILO 144 1976) 41 as the foundation of its strategy making and policy formulation. The ILO has produced a principal standard (#144) for strategic consultation between representatives of workers, regulators and employers, both generically and related to sectors. Despite the maturity of ILO 144 1976 and the widespread adoption of tripartism in the EU, some Member States had no mechanisms for it prior to the Directive.

Article 6(8) requires Member States to establish mechanisms for effective tripartite consultation between the competent authority, duty holders, and worker representatives in formulating standards and policies relating to major accident prevention.

Aligned to the measure in Article 6(8) is the requirement in Article 22 for owners and operators to put in place arrangements for confidential reporting of concerns by staff on installations and for protection of whistle blowers. The arrangements are to be communicated to all workers on the installation. Typically information and contact details for the competent authority will be posted on notice boards and staff trained on this subject.

The competent authority is to make compatible arrangements for conducting investigations into confidential reporting, and making authoritative reports, whilst preserving anonymity.

The Commission has examined how these arrangements are working out. It found wide approval of all stakeholders of the fundamental right bestowed under Article 22. Similarly, whilst some Member States have practiced tripartite consultation since the ILO standard, duty holders in previously non participating Member States were vocal in support to new arrangements under which they have a voice in strategy. Duty holders report significant value-added where the scheme of tripartite consultation was newly introduced, especially outside the North Sea region where no specific safety legislation was formerly in place.

Some Member States reported that their tripartite committees had become somewhat torpid. Moreover, in some Member States there are excellent tripartite arrangements under the auspices of the operators associations attended by top management and leaders from Member States and TU’s. An example is the UK’s ‘Step Change in Safety’ 42 , formed more than 40 years ago and probably the most influential standing safety body of its type.

It is a major key performance indicator and a leading indicator for offshore major accident prevention, that industry establishes and maintains effective consultative forums under its own auspices. The statutory committees have the added driver of law. Furthermore, it appears that the establishment of a level aspect of statutory tripartite consultation throughout the EU will of itself will add value in policy terms.

With regard to the Directive’s provisions on whistle blowing 43 , there are signs from the Commission’s interactions with stakeholders that Member States take insufficient interest in training for workers and managers and in developing the applications of whistle blowing as a surrogate to the values of transparency, safety culture, and integrity issues for the sector.

The TU’s consider the protection of whistle-blowers is insufficient across the sector as a whole, and favour a link between whistleblowing arrangements and tripartite consultation mechanisms relating to policy and standards. No concrete examples of a lack of rigour have been forwarded to support the TU assertions, but no doubt the position will be kept under review.

Tripartite consultation may not yet be fully embedded in many Member States, and time and encouragement will make the difference. However, we note that at present, no voluntary sharing of learnings or other information exists or has been encouraged between tripartite committees of Member States (not required by the Directive).

Conclusions

Although taking note of critical comments, it appears that in general terms the confidential reporting mechanisms for workers to directly contact the competent authority in their area appear to be working, and is welcomed particularly in Member States where no such provisions existed before the Directive. In the future, competent authorities and the EUOAG may receive advice from TU’s and other worker representatives on the functioning of the arrangements throughout the EU.

Apparently, there is also considerable support to the measures relating to tripartite consultation, and that the development of a tripartite culture is improving.

5.8Transparency concerning reporting of incidents – the Implementing Regulation

Articles 23, 24, and 25 of the Directive concern measures for EU-wide reporting systems, under which the Commission is to make an implementing regulation for common reporting parameters. This Implementing Regulation (1112/2014/EU) includes a simplified reporting format for Member States’ for publishing incident data and other relevant information.

The Member States are to make public important information relating to incidents occurring in their territory and to report to the Commission annually. Finally, the Commission is required to make annual reports.

The cycle of reporting to the EU-level is as follows.

Year 1: Member States’ Competent Authorities receive data from duty holders.

Year 2: Competent authorities aggregate data and carry out a quality check. Member States send a report in the format of the Implementing Regulation, to the Commission. The Commission undertake a quality check and subsequently transfer all information provided by Member States into the Commission’s own data base, in order to assemble an EU-wide report (latest 1st of June).

Year 3. The report is published at the beginning of year 3.

As illustrated by the above timeline, there is a lag between the focus year (of industry reporting incidents to the Member States) and the Commission report. Already two reports have been published to date (2019) covering 2016 44 and 2017 45 . There is now a baseline for future trend analysis.

The scheme is functional; it is the first statutory inter-country reporting system anywhere and therefore represents a significant step. Given that there is a widely held public view that the oil industry and its regulators are not transparent, the requirement for a common reporting system is key to greater public acceptance.

Looking through the data for the first of the EU annual reports, there is a disparity of data reporting and handling between Member States that suggests the system needs time to stabilise.

Some Member States believe the current guidance is insufficiently detailed. This was not expected as the expert committee that assisted in the preparation of the Commission’s draft Regulation assembled a detailed guidance document, including practical examples of how to complete and provide information on incidents.

The work of the expert committee took into account advice and guidance from regulators and industry and was a compromise of systems. Nevertheless, some duty holders are dissatisfied with some of the incident severity thresholds (e.g. relating to release volumes of hydrocarbon escapes) where these are different to standards that are already in use. Consequently, there is an inevitable disparity between the new system and some of the pre-existing thresholds of reporting.

Some Member States active with offshore operations in the North Sea region, specifically the UK, have claimed that the data set to be collected and published under the Implementing Regulation is not a useful tool to determine leading indicators for major accident risk. The Member States concerned suggest, notwithstanding their representatives were on the expert comitology committee, which agreed on the templates, that significant revision is required to allow more meaningful reporting.

The EU-wide incident reporting system that collates all qualifying incidents, including near-misses in EU waters, reported under obligation from all actors (duty holders, Member States and the Commission) that this reporting initiative represents a significant advance in transparency of the sector from a global perspective.

All of the actors need to focus on the efficacy of the system, specifically regarding full, prompt and accurate reporting. The EUOAG monitors the system, is the interlocutor to civil society, and ensures continual improvement in the system over time.

Where stakeholders perceive that critical improvements need to be made, the EUOAG (and the initiator of further implementing regulations) should be appropriately advised with justifications. However, it should be underlined that not all actors have experience with the Implementing Regulation.

5.9Emergency preparedness and response arrangements of operators/ owners

This particular obligation concerns the emergency response arrangements of the operator or owner to contain an incident to the vicinity of the installation, usually taken to mean within the 500 meter safety zone surrounding it.

Articles 14, 28, and 30, with a related obligation under Article 29, concern arrangements of the Member States, namely, national contingency plans. These should be integrated as necessary with those of adjacent installations and with national contingency plans of neighbouring Member States. The entire plan that encompasses procedures, equipment, responsibilities, and contingencies, with the goal of containment of any incident, is referred in the Directive as the Internal Emergency Response Plan (IERP).

Additionally, the operators’ or owners’ relevant expertise and equipment for emergency response is to be always available, and emergency response exercises are to be conducted by Member States, operators, and owners.

According to information provided by Member States in EUOAG meetings, installations present in EU waters have appropriate emergency response plans (IERP) in place. Some Member States have agreed extensive procedures with their duty holders that govern the overall response within that Member States’ jurisdiction. Nevertheless, it is not shown the extent to which internal emergency response plans are harmonised with national contingency plans of Member States throughout the EU. Focused exercises with Member States’ authorities and operators, as for example carried out by the UK, are the most effective means to validate the effectiveness of the integrated arrangements.

The industry’s response to implementing the Directive has been for owners of non-production mobile installations (mainly mobile drilling units for exploration of oil and gas (MODUs)) to develop fit for purpose response plans that were different from the plans for the operators of installations for the production of oil and gas. Prior to the Directive, the requirements varied between Member States, and owners had claimed that the plans required of them by some Member States were more suited to production installations with their concentrations of hazardous process plant and inventories of flammable substances and less to MODUs.

Duty holders have also readily acknowledged that the requirements under the Directive have added value by improving the integration of installation-based emergency response plans with national contingency plans.

Under the Directive, the IERP is required to consider all relevant emergency scenarios as an absolute duty, i.e. the plan will not need to quantify the risk of a potential scenario in order to make response arrangements to deal with it.

There is a significant uplift in confidence of the integration of the modern sophisticated inventories of the industry, and the Member States. The requirements for internal emergency response plans by operators and owners appear to be working as intended.

Requirements for internal emergency response plans by operators and owners appear to be working as intended. It is anticipated that the regulators and social partners will request operators in particular to develop more inventive scenarios to exercise and test the arrangements they have made. The appropriate regulatory authorities in the Member States may take a close interest in the effectiveness of installation-based emergency response plans.

5.10Emergency preparedness and response arrangements of Member States

Analysis

Articles 29, 30, and 31 of the Directive apply to the emergency response arrangements obligated to Member States, known as External Emergency Response Plans (EERP) or national contingency plans. Article 28 requires Member States to ensure that the IERP’s of duty holders are integrated and coherent with the Member States national contingency plans.

Under the measures, Member States must ensure EERPs are executed immediately upon report of a major incident. Furthermore, investigations by Member States into the circumstances of the incident are to be conducted without delay, giving due regard to the circumstances. Member States should not take actions that may have an adverse impact on the emergency response or recovery operations.

Although emergency response is initiated at the national level, emergency arrangements should ensure that equipment and expertise is compatible and interoperable beyond national borders, and also in Member States that do not carry out offshore operations themselves, due to potential implication for further Member States.

In all circumstances, emergency response exercises are to be conducted by Member States, operators and owners. The transboundary risks of pollution are to be specifically addressed and suitable cooperation is to be arranged including with third countries.

Member States that do not have active offshore oil and gas operations are required under Article 32 to establish focal points, to cooperate with active Member States in contingency planning and to make their own arrangements for responding to a major accident that threatens their marine and coastal environment. Adjacent Member States are also required to cooperate with a major accident investigation launched by the Member States in which the accident occurred.

Duty holders and Member States acknowledge that the requirement for national EERPs to be integrated with IERPs has added value by improving coherence between installation-based emergency response plans with national contingency plans.

Around five Member States and regions were still preparing national contingency emergency response plans during the year 2019. The Commission provided technical assistance at a technical workshop in 2017, attended by competent authorities, national intervention authorities and agencies, specialist systems providers, IADC, and IOGP. The proceedings of the event represent a compendium of the depth of experience and expertise that exists in the North Sea/Atlantic region, and the Mediterranean region coordinated by REMPEC (Malta).

Under Article 10 of the Directive, the EMSA also has obligations. For the most part European Maritime Safety Agency (EMSA) is required to respond to requests by Member States to assist in both preparations and interventions. Some arrangements are agreed with EMSA and Member States. According to Article 10(3) EMSA may assist the Commission in assessing the suitability of Member States' EERPs.

The Commission services carried out a survey on the availability of national plans in 2017. At that time, data showed some fragmented approaches to consideration of transboundary pollution. However, industry claims there is an effective interoperability of expertise and equipment between Member States in contiguous maritime regions, and that harmonisation of expertise and equipment is continually improving. Major inventories or emergency equipment maintained by specialist service providers are available on a regional/transnational basis in the UK, Norway, and Italy. The Commission continues its co-operation with Member States and industry to ensure effective and up-to-date EERPs.

Conclusions

1.Even though there is collaboration and sharing of expertise, it is not clear whether this happens consistently across all concerned MS and whether the efforts made are due to the Directive. It seems that the measures in the Directive including the particulars on external emergency response plans in Annexes VII and VIII have further stimulated collaboration and associated sharing of inventories and expertise of Member States’ personnel throughout the EU. Nevertheless, it remains unclear how far the harmonisation of equipment is adequate to react to large scale offshore accidents.

It would be beneficial to undertake assessments of practical exercises, simulating the response to accidents. Given the limited information available and the importance of this topic, there might be value in further cooperating with EMSA on evaluating Member States' exercises, specifically related to the effectiveness of transboundary cooperation. Commission services may be asked to provide assistance in up-grading and up-dating the EERP.

5.11Availability of dissuasive penalties for breaches of duty

Analysis

There is an apparent disparity between Member States’ approaches to penalties for causing accidents and the enforcement of an appropriate follow-up. Article 34 requires Member States to specify rules on penalties applicable to infringements of the national provisions adopted pursuant to the Directive, specifying that those penalties should be “effective, proportionate and dissuasive”. Article 34 also requires Member States to notify their provisions to the Commission by July 2015. Only few Member States submitted information referring to this duty.

Member States may apply in the offshore oil and gas sector administrative, as well as criminal sanctions. Article 34 of the Directive does not specify the type of penalties and so Member States may choose whether to use criminal or administrative sanctions. In some cases, as under the Directive 2008/99/EC (Environmental Crime Directive 46 (ECD)), Member States are obliged to criminalise certain behaviour.

Whilst most sanctions applied by Member States require the offence to include both negligence and harm, other Member States prosecute the breach of duty, not the effect. In others, a near-miss major accident is treated as if a major accident has indeed occurred. In some Member States it is not a criminal offence to spill oil from offshore petroleum activities (although it is an offence to spill oil from a tanker).

It has been clarified in the discussions with the Member States that no consistency between their measures exists, both in terms of powers, functional arrangements, and enforcement. One Member State has embedded criminal enforcement powers within its Competent Authority. A number of Member States prefer direct-acting sanctions which mandate improvements, or prohibit activities, rather than engaging with potentially resource intensive enforcement processes through the courts. At the end of court proceedings, the financial penalties are often modest or insufficient to deter certain behaviour, potentially leading to further accidents.

Concerning the type of sanction, many Member States argue that the publicity attached to enforcement is of itself a significant sanction, as the impact on corporate reputation is more significant than financial penalties themselves. This may be true to an extent, but the level of financial penalties applied to the oil and gas sector across the EU is extremely low. It is rare for a penalty exceeding 1 million Euro to be levied, which relative to the whole market value of the operators' companies may not be significant. Substantially higher penalties, as appropriate for the case at hand, might actually make more of an impact on the aspect of dissuasion. Certainly, the social partners (TU’s and NGO’s) call for bigger financial penalties that are proportionate to the commercial scale of the sector, the high frequency of accidents, and their potentially wide-reaching impacts.

There also appears to be no obvious relationship between offences in the context of a major accident hazard, and sanctions under licensing clauses. The Commission services are unaware of any license holder that has had its license revoked following a proven gross breach of duty.

It seems that several factors contributed to this situation. Firstly, a licensing auction for selecting the best candidate for exploring and exploiting a new offshore area tends to be a buyer’s market, and Member States may be unwilling to drive out an operator. Secondly, the view is often expressed that a major accident caused by a breach of duty is a retrospective indicator. From the industry’s view, under this argument, an operator having had a major accident will invariably become a better operator going forwards. To remove the license from an operator for a past breach is a severe penalty. Finally, the forced disposal of assets to another operator, even a member of the joint venture under the license involves commercial trading and potential loss and denial of income. Most Member States would avoid being drawn into this difficult area, and perhaps being caught under legal summonses.

As mentioned earlier, there has been no major offshore accident with large scale effects on workers and the environment, occurring anywhere in the EU since the Directive came into effect. Some Member States had no experience of enforcing sanctions previous to this Directive.    

Conclusions

There are many different approaches amongst Member States to enforcement and to decisions concerning the follow-up to offences and breaches of duty. For offshore oil and gas operations no information is available to determine the superiority of either the administrative or criminal penalties’ effectiveness.

However, Member States’ level of financial penalties for breaches of duty does not seem to be suitable to both the need for public interest, and the potential consequences of a major accident in EU waters, irrespective of the level of escalation in the accident concerned. It is unlikely that the current penalties will make a significant impact with either investors or the public.

License authorities are already required, pursuant to the Directive, to take into account the major accident prevention performance of applicants. Whilst there have been no major accidents with blow-outs in recent times, competent authorities should continue to pursue their right to provide independent expert advice to the licensing authorities with the objective to complement the information available for the selection decision.

5.12Recovery of costs of maintaining the competent authority

Analysis

Under Article 8(5) of the Directive, Member States may establish mechanisms by which the financial costs accruing to the competent authority in carrying out its functions under the Directive, may be recovered from licensees, operators or owners.

During Commission's workshops, duty holders also raised concerns about the cost of applying the existing regulation. All but a very few competent authorities now practice some form of cost recovery. Member States that did not recover their costs prior to the Directive now do so.

Funding levels of the different competent authorities do appear to be proportional to whether there is cost recovery, and the level of recovery. Funding has of course direct impact on the assurance of adequate performance of the duties of the competent authority under the Directive.

There are some considerations attached to cost recovery schemes. Member States have discretion to recover their costs from primary duty holders (operators of production installations, owners of non-production installations). Equally, they may choose not to do so.

Where Member States choose to recover costs, they should act in an accountable and responsible manner. Therefore, Member States may envisage to publish accounts to demonstrate that only pertinent costs are being recovered so that duty holders are not subsidising expenditures of the state unrelated to functions under the Directive.

Duty holders point out that where Member States use a charge-out rate mechanism (based upon an hourly rate for competent authority staff, usually front line inspectors 47 ) they sometimes are being overcharged. For example, where a meeting with the competent authority is attended by a large number of inspectors, all of whom count as a cost under the charge-out system but where some of the attendees are unnecessary to the business under discussion. Duty holders also report that where one Member States may require a single RoMH for a production facility comprising several linked installations, another Member States may require a RoMH for each individual installation, increasing costs by Euro1million per additional RoMH. Duty holders also claim that competent authorities are not forthcoming with estimating charges for the next financial cycle, which complicates financial planning.

All such situations are likely to be, in the opinion of the Member States concerned, entirely necessary for the discharging of their responsibilities. Therefore, these become matters of reconciliation between the ‘parties’. However, the central point is that cost recovery introduces an obvious tension in the duty holder – regulator relationship, the management of which is primarily the responsibility of the regulator.

Where the operators' sector of a Member State is fully or partially state owned, cost recovery between the competent authority and the duty holder may be a public accounting exercise. However, there have been calls from some members of EUOAG for the recovery of costs from duty holders to be made an obligation, so as to create a level playing field for all competent authorities.

Member States are obligated to ensure that the competent authority has adequate human and financial resources to discharge its functions under the Directive (Article 8(5)), as well as to review the activities of the competent authority and make necessary improvements (Article 8(9)). If reviews revealed that competent authorities are under-resourced, Member States are obligated to make the necessary resources available, in line with the Directive's provisions.

The Commission published a report in 2016, pursuant to Article 27(4), on the adequacy of resources of competent authorities to discharge their functions 48 . This report found that on average Member States had a 10% staffing deficit for specialist experts in areas such as: diving, naval architecture, and environmental engineering. The report also noted a slowdown in activity caused by a rapid fall in the oil price from $105 per barrel in 2013 to $40 at the end of 2015. It called on Member States to ensure they recovered their costs from industry, and ensured the competent authorities had appropriate resources to attract and train expert staff.

In 2016, the Commission also asked Member States to contribute to a stocktake of national arrangements for discharging their functions under the Directive, pursuant to Article 27(5). Regrettably, only 6 of the 16 focal Member States mentioned previously, provided information. Broadly speaking, North Sea Member States replied that their prior resource-bases were adequate, having been improved by combining safety and environmental regulators into a single competent authority. Smaller Member States indicated the nature of their tentative arrangements to reach out to pools of external expertise, should there be an uptick in activity.

Conclusions

Some stakeholders consider it desirable to have all Member States recover the costs of their activities under the Directive, using responsible and accountable mechanisms. There are several possible mechanisms for this, including but not limited to: a levy, a charge per activity (RoMH assessment; installation inspection, etc.), or an hourly charge-out rate per inspector. For these measures, the costs of regulation would be entirely transparent for each Member State and could be an additional parameter in a subsequently revised taxonomy of the Commission’s annual reporting. However, since the Directive leaves flexibility for achieving certain goals, it does not prescribe procedural issues such as a statutory duty on Member States to recover costs from industry.

The requirement at Article 8(9) of the Directive for Member States to review and thereafter ensure the effectiveness of their competent authorities provides a future insight to the key point of this theme; that sufficient human and financial resources are available for competent authorities to discharge their responsibilities.

5.13Special theme: Liability, compensation claims and financial security of offshore oil and gas producers

5.13.1The framework

5.13.1.1Overview

This part of the assessment presents the:

·Legal frame of the Directive,

·A summary of the preceding Commission's report on these subjects,

·The issues in the context the European Parliament’s resolution, which includes requests how to deal with these themes,

·A summary of rules and legislation in Member States, including the quality of the Directive’s implementation,

·A summary of the views of stakeholders, received via the public consultation and expert consultation (see annexe ….).

Finally, this assessment presents an approach taken by the UK to ensure financial security in the event of a costly accident: the Offshore Pollution Liability Agreement (OPOL).

5.13.1.2Legal provisions of the Directive

The themes of liability, the handling of compensation claims and financial security of the licensee are closely linked to each other. Article 7 of the Directive, with reference to Directive 2004/35/EC (ELD) concerns “liability for environmental damage”, which establishes “financial liability for the prevention and remediation of environmental damage as defined in the Directive”. Furthermore, Article 4(3) of the Directive uses the term “liabilities”, apparently establishing a broader notion. Regarding the financial capability of the applicant for a license authorising offshore operations, the Directive requires the ability to cover “potential economic damages where such liability is provided by national law” (Article 4(3c) of the Directive).

The Offshore Safety Directive frequently refers to the environmental liability regime, designed by Member States when implementing the Environmental Liability Directive. Member States had to implement provisions on liability of the Offshore Safety Directive (Article 4, paragraphs 2 and 3). This assessment uses the term “liability” in reference to “civil liability”.

The Directive attributes liability to the licensee (see recital 58, Articles 4 and 7) and requests the licensing authority to take into account the financial security of the applicant before granting a license. However, given that the Directive has merely established a framework, the specific rules in each Member State, for example the assessment of the financial strength of an applicant, depends on national legislation regarding the implementation of the Directive.

The Directive does not establish procedures for dealing with financial claims under civil liability, for example, regarding polluted property, personal injury, or economic losses. According to Article 4 (paragraph 3, point 4), “Member States shall, as a minimum, establish procedures for ensuring prompt and adequate handling of compensation claims including in respect of compensation payments for trans-boundary incidents.” The Directive does not provide further details on how such rules should be designed, nor does it provide criteria for examining the financial security of the licensee. Member States set these rules themselves taking into account its culture on legislation and the particular regional situation.

The Directive contains further provisions on liability. It recalls “the party responsible should always be clearly identifiable before offshore oil and gas operations are commenced” (recital 9). It also clarifies “that holders of authorisations for offshore oil and gas operations pursuant to Directive 94/22/EC 49 are also the liable ‘operators’ within the meaning of Directive 2004/35/EC of the European Parliament and the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage, and should not delegate their responsibilities in this regard to third parties contracted by them” (recital 11).

The Directive requires Member States to ensure that their respective legal systems do not allow the exclusion or limitation of the operator’s duties by entrusting the performance of tasks (possibly leading to or contributing to major accidents) to other entities on a contractual basis (Article 3(2)).

Furthermore, its Article 4 (2 c) on “safety and environmental considerations relating to licenses” provides for that already in the phase of granting licenses the authority should take into account “the applicant’s financial capabilities, including any financial security, to cover liabilities potentially deriving from the offshore oil and gas operations in question including liability for potential economic damages where such liability is provided for by national law”.

Article 4(3) of the Directive obliges Member States to require evidence of licensee’s technical and financial capacity for effective emergency response and subsequent remediation, and to assess provided evidence. It also requires Member States to facilitate the deployment of sustainable financial instruments and other arrangements to assist prospective licensees in demonstrating their financial capacity, as well as to “establish procedures for ensuring prompt and adequate handling of compensation claims”.

Furthermore, the Directive’s Article 7 on “liability for environmental damage” underlines that “Member States shall ensure that the licensee is financially liable for the prevention and remediation of environmental damage as defined in that Directive [ELD], caused by offshore oil and gas operations carried out by, or on behalf of, the licensee or the operator.”.

The Directive sets only a frame for aspects as liability, financial security and the handling of compensation claims. Furthermore, it requires the Commission to report on the issue of liability. The Commission’s report published in 2015 provides an assessment of the effectiveness of the liability regimes in the Union, with respect to the damage caused by offshore oil and gas operations 50 .

5.13.2Commission report on liability, compensation and financial security

At the time of publication of the requested report by the Commission, 51 on 14 September 2015, only a few Member States had implemented the Directive into national law. Accordingly, the Commission could neither draw final conclusions nor issue recommendation on the potential follow up. Instead, its analysis found the following:

“Broadening liability provisions through EU legislation does not appear appropriate at this point of time. In certain cases, the Brussels I 52 and Rome II 53 regulations prevent differences in national regimes from disadvantaging claimants from other EU Member States. In addition, some Member States may be reappraising their existing liability regimes for offshore accidents in tandem with other changes introduced by the Directive.

However, the Commission will be able to conclude on the need for further steps by the time of the Directive’s first implementation report. Notably the Commission can 54 :

• Continue to advance liability issues through structured EUOAG discussions;

• Focus on liability-related provisions in the Directive conformity checks; and

• Use EUOAG meetings for systematic data gathering covering all liability-related aspects of newly transposed laws.

There is currently a lack of uptake of financial security instruments to fully cover the more infrequent and costly offshore accidents in the EU. In addition, there are just two compensation mechanisms currently in place specifically for oil and gas accidents in the Focal States. However, provisions in the Directive should lead to significant improvements in both of these areas.

Should the new national laws not improve the availability of financial security instruments and put in place procedures for ensuring prompt and adequate handling of compensation claims, the Commission may reassess whether and what further EU action could achieve these objectives.

The Commission encourages Member States to share their experiences on financial security instruments, liability, compensation and criminal penalties…”

The Commission report concludes that “on the basis of this, the Commission should be well placed to conclude on the need for further steps. The effects of the Directive, as implemented by Member States, will show in the coming years whether it is appropriate to bring certain conduct leading to major offshore accidents within the scope of criminal law for further re-enforcing offshore safety. When appropriate, the Commission will put forward a legislative proposal.”

Taking into account the late transposition of the Directive by Member States, it is considered that the report’s conclusions are still valid.

5.13.2.1The European Parliament’s resolution on liability and compensation claims

In the year following the Commission’s report on liability, the European Parliament carried out an in-depth assessment on “Liability, compensation and financial security for offshore oil and gas operations” and issued a resolution on this subject on 1 December 2016 55 . Specifically, with regard to liability, the European Parliament:

• “Calls on the Commission to assess the appropriateness of introducing further harmonised rules on liability, compensation and financial security with a view to preventing any further accidents with cross-border implications;” (page 159)

• “Regrets, in this context, that the Directive does not deal with liability for civil damage to either natural or legal persons, be it bodily injury, property damage or economic loss, whether direct or indirect;” (page 160)

• “Stresses that there is no liability in many of the Member States with offshore and gas activities for most third-party claims for compensation for traditional damage caused by an accident;” (page 160)

• “Is of the opinion that strict civil liability rules should be established for offshore accidents in order to facilitate access to justice for victims (both legal and natural persons) of offshore accidents, as this can provide an incentive for the offshore operator to properly manage the risks of operations; believes that liability caps should be avoided;” (page 160)

• “Emphasises, therefore, that it is of the utmost importance to update existing liability systems in the Member States in order to ensure that, should an incident occur in their waters, it would not adversely affect the future of the offshore oil and gas operations of the state in question, nor that of the EU as a whole were it to occur in an area that is largely dependent on tourism for revenue.” (Page 161)

At several occasions, the Commission has discussed questions of liability, compensation claims and financial security with Member States in the European Offshore Authorities Group, also in the context of the European Parliament’s resolution. At the same time, the Commission has analysed and assessed to what extent and depth Member States have strengthened the notion of “liability” in legislation related to the implementation of the Directive. Furthermore, the Commission has asked Member States whether horizontal legislation would be effective and adequate in the absence of specific legislation for offshore oil and gas installations. However, the variety of positions and the incomplete set of information requires further analysis before conclusions on a potential follow-up can be drawn.

5.13.3Diversity of rules on liability, handling of compensation claims, and financial security instruments in Member States’ jurisdictions

The applicable environmental liability regime under the 2004/35/EC ELD and the Offshore Safety Directive (Article 7) is a strict liability system for all types of environmental damage if caused by certain dangerous activities, among which are also offshore oil and gas operations.

As mentioned above, all Member States apply the same rules for environmental liability, as established by Art. 7 of the Directive (with reference to the definitions of the ELD): “…Member States shall ensure that the licensee is financially liable for the prevention and remediation of environmental damage as defined in that Directive, caused by offshore oil and gas operations carried out by, or on behalf of, the licensee or the operator.”. In contrast, on the matter of civil liability, rules and legislation reflect cultural and historical developments in Member States and therefore vary considerably. Liability provisions may have a major impact and potentially significant costs on different actors depending how arrangements are operating in different jurisdictions.

With regard to Member States’ legislation, it is important to distinguish between strict liability and fault based (tort based) liability regimes following a major accident, including to the environment, as well as within the traditional damage category of ‘economic losses between consequential and pure economic loss 56 . Strict liability means that the identified liable party will be subject to liability, e.g. by compensation payments, without the need to establish fault and even if it properly applied all legal obligations and expected safety measures. In contrast, fault based liability may lead to a financial compensation only in the case of negligence or intent leading to the major accident.

Regarding the remediation of losses arising from a major accident, Member States have different rules on liability and compensation payments in place, which may lead to different financial liabilities for the operators and owners of offshore installations.

Here is an overview of characteristics of applicable Member States’ legislation:

General framework:

·Effects of liability provisions may act offshore specific (i.e. geography), sector specific (i.e. industry) or as general rules (i.e. national generic provisions).

·Some Member States did not establish clear legislation on liability, leaving liability and compensation determinations subject to the judgements of national courts.

Specific characteristics of liability and compensation are:

·Liability of the licensee as requested by the Directive at Article 7.

·Strict liability versus fault based liability: the majority of Member States operate a strict liability regime, meaning that the identified liable party may be subject for compensation payments, even if it applied all rules and safety measures (fault or culpa is not a condition), but caused nonetheless the damage.

·Some Member States operate fault-based liability, with the burden of proof for the fault either on the defendant (that would normally be the operator/licensee) or the claimant.

·Beyond environmental liability established under Directive 2004/35/EC, in most Member States, further to compensation for bodily injuries and property damage and other economic loss, an entity liable for an accident (in the offshore sector, normally the operator) shall also compensate for environmental pollution.

·In certain Member States, only bodily injuries and property damages qualify for financial compensation.

In summary, the liability regimes applicable in Member States vary substantially, and each Member State applies, a mix of specific and general provisions, some unique to a particular Member States.

According to Article 14 of the ELD “Member States shall take measures to encourage the development of financial security instruments and markets by the appropriate economic and financial operators, including financial mechanisms in case of insolvency, with the aim of enabling operators to use financial guarantees to cover their responsibilities under this Directive.”. Since the Directive does not provide additional legislation, Member States are largely free to set rules on the acceptance of financial security instruments.

5.13.4Implementation by Member States and the effectiveness of rules

Article 3(2) of the Directive aims at ensuring that legal systems of focal Member States do not allow the exclusion or limitation of the operator’s duties by entrusting the performance of tasks to other entities on a contractual basis. Its application should not be limited to organisational aspects of offshore oil and gas operations, but should be also reflected in liability regulations related to this type of industrial activity.

It should be noted that the legal systems of some Member States allow for the limitation of an entity’s liability, obliged to take or refrain from a specific action, in case of an assignment of this obligation to a contractor (culpa in eligendo). The usual prerequisites of such a limitation are the professional character of the contractor and a due diligence taken by the assigning entity before the assignment. Application of the rule in question may lead to a complete transfer of a potential liability, arising from non-performance or improper performance of the required task, from the initially obliged entity to its contractor. If applied to the relationship between the licensee and any of its contractors, the said rule would limit, at least partially, the liability of the former and transfer it to the latter (i.e. an entity usually of a lower financial capacity than the licensee), possibly stopping potential claims from being fully satisfied. Such a result would contradict the basic principles of the Directive. Thus Article 3(2) should be implemented by the Member States by putting into effect, if necessary, regulations not allowing for the licensee’s liability to be limited in case of contracting of certain obligations, arising from offshore oil and gas operations, to a third party. Several Member States have amended the rules existing in their respective legal systems to comply with the Directive’s provisions.

It should be added that the accepted protocol in the offshore sector, upheld in all commercial legal instruments used in the offshore sector (usually English or US commercial law provisions), is that the operator is liable for all financial damages from accidents involving subsurface substances. This protocol has been thoroughly tested right up to the present time as operator BP has unsuccessfully pursued its contractors for a contribution to the financial liabilities arising from the Deep Waster Horizon (Macondo) disaster in the Gulf of Mexico 57 .

Member States had difficulties demonstrating adequate implementation of Article 4 of the Directive, which includes provisions on safety and environmental considerations relating to licenses, specifically basic provisions on liability, compensation claims and the financial capabilities of applicants for a license. However, Member States’ existing horizontal national legislation frequently provides for the principles of Article 4. In certain Member States where this is not the case, jurisprudence by the national courts may ensure that Article 4 is in principal applied. Where Member States do not have adequate provisions in place, the Commission follows up this issue.

Under Article 4(3) of the Directive, Member States “shall, as a minimum, establish procedures for ensuring prompt and adequate handling of compensation claims including in respect of compensation payments for trans- boundary incidents.” At the current stage, due to the absence of major accidents involving considerable damage, the Commission cannot fully assess the effectiveness of the implementation of this part of Article 4.

It has been noted, however, that the approach to this implementation varies significantly. Many Member States did not amend their legislation to comply with the Directive’s provisions, considering that legal frameworks ruling on compensation schemes in their respective systems are sufficient to handle any compensation claim arising from offshore oil and gas operations. Other Member States have foreseen some amendments leading to, inter alia, prioritisation of enforcement of such claims or imposition on licensees of an obligation to set up internal handling procedures applicable to claims arising from offshore incidents.

Prompt handling of compensation claims depends significantly on the efficiency of particular legal systems, especially expressed in the average length of proceedings 58 . In Member States where civil courts have jurisdiction to handle claims arising from offshore oil and gas operations, and where resolving civil cases takes particularly long, ensuring prompt handling of compensation claims may prove especially challenging. Putting in place specific rules might help Member States to ensure that the compensation claims covered by the Directive are handled within a reasonable timeframe.

For example, in the UK any affected party needs to file the claim in line with national rules and legislation (e.g. to an authority, an intermediary or a specialised compensation scheme). If the claim is valid and the financial compensation attributed, the liability party shall settle the claim. The competent authority requires the liable licensee to take the necessary preventive or remedial action to restore the baseline condition of the damaged natural resources (clean-up and primary, complementary, or compensatory remediation) and to bear the full liability.

It remains a political decision whether to consider additional or reinforced EU-wide harmonisation measures, targeting both the environmental and civil liability regimes.

According to the Directive, when assessing the technical and financial capability, including any financial security, of the applicant for a license, due account should be taken of the applicants financial capabilities to cover liabilities deriving from offshore operations (Article 4(2)c). Liabilities apply both for environmental pollution and potential economic liability for economic damages where such liability is provided by national law. However, despite the importance of this provision, from a total of 16 Member States with exploration or production, 8 did not fully or not correctly implement paragraph 2 of this Article.

According to Article 4, paragraph 3, Member States shall ensure that the licensing authority does not grant a licence unless it is satisfied with evidence from the applicant that the applicant has made or will make adequate provision, to cover liabilities. Six Member States did not adequately transpose this part of the Directive.

In the EU so far, enterprises have covered costs from accidents with their financial means. However, even the largest enterprise may face difficulties to deal with accident costs at the scale of the Deepwater Horizon case.

Since Member States had to report accidents to the Commission (from 2016), no major accidents incurring serious pollution or damage have occurred. As a result neither practical experiences nor examples regarding the appropriateness of operators/owners financial means for the effective handling of large scale and numerous compensation claims are available for recent years. 

5.13.5The Oil Pollution Liability Agreement (OPOL)

The Atlantic region’s Member States are members of the Oil Pollution Liability Agreement. This system is operated by a not-for-profit management group, and provides a financial safety net wherein members indemnify a liability where the liable entity defaults on their financial responsibility.

License-holders active on the UK Continental Shelf are party to the OPOL, as are licensee/operators of offshore facilities located in the territorial waters of Denmark, Germany, France, Ireland, the Netherlands, and Norway (essentially the Atlantic/OSPAR region).

Under the OPOL Agreement (dated 4 September 1974, as subsequently amended), operating companies agree to accept liability for pollution damage and the cost of remedial measures up to a maximum of US$250 million per incident, with only certain exceptions. Within this limit there may also be included the cost of remedial measures undertaken by the party to OPOL involved in the incident.

The parties must demonstrate:

·Financial responsibility to meet claims arising under OPOL safety net (i.e. qualifying incidents) by producing evidence of insurance from insurers with the financial credit strength rating required by the OPOL rules, and/or,

·Guarantees from companies with acceptable financial or credit strength rating required by the rules and/or,

·By demonstrating with acceptable evidence that they qualify as a self-insurer that also meets the financial or credit strength rating required by the rules.

They also jointly agree that in the event of a default by one of the parties, each will contribute proportionally to meet claims.

The responsibility for meeting claims under OPOL rests solely with the operator. As in all joint ventures, the operator may wish to make its own arrangements as to financial responsibility with other participants (known as non-operators) in a venture, but these will not involve a submission to or scrutiny by OPOL of any financial documentation concerning non-operators.

OPOL initially applied to offshore installations within the jurisdiction of the UK. Membership is a prequalification item for application for a license and must be maintained in order to continue to hold a license. The OPOL system was later extended to apply to offshore installations within the jurisdiction of other countries as well, although only the UK requires OPOL membership as a license condition.

To sum up, the OPOL system is set up to:

·Provide an orderly means for the expeditious settlement of claims arising out of an escape or discharge of oil from offshore exploration and production operations;

·Stimulate immediate remedial action by the parties;

·Ensure the financial responsibility of the parties to meet their obligations;

·Provide a mechanism for ensuring that claims are met up to the maximum liability under OPOL;

·Avoid complicated jurisdictional problems.

Under the OPOL system, each operator agrees that it will reimburse the public authorities the costs of remedial damage and pay compensation to third parties for pollution damage arising from a discharge of oil from offshore facilities up to an aggregate maximum of US$ 250 million per incident.

OPOL members must submit evidence of financial responsibility for their offshore facilities throughout the period of their membership. This must be for an amount not less than US$250 million per incident and US$500 million in the annual aggregate. Should a member’s financial status alter such that it cannot meet its obligations under the Rules, the entity’s OPOL membership will be suspended. In the UK suspension of OPOL membership would automatically suspend the license holding.

The arrangements for monitoring and enforcement under the rules are robust. In the 45 year history of OPOL, during which operators and owners have dealt with the cost of major accidents, OPOL members have never been called upon to indemnify a loss where the liable entity cannot meet its obligations.

5.13.6Financial security

In industry’s estimation, several Member States have brought into effect robust and workable financial responsibility requirements, specifically to implement Article 4. For example, the 2018 publication “Liability Provision Guidelines for Offshore Petroleum Operations” by Oil & Gas UK.

The UK licensing authority (the Oil and Gas Authority, OGA) has adopted guidance first brought into effect by the UK trade body (Oil and Gas UK), a model code of practice to comply with the Directive, specifically Member States obligation to grant a license pursuant to Article 4(3). This has attracted wider interest as a generic good practice guide for other jurisdictions, including third countries.

The Guidelines (which have been adopted by the UK government as a suitable code of practice for both the licensing authority and the applicants for licenses) encapsulate a straightforward process to determine the level of financial responsibility to be maintained by licensees for their operations. The objective is to cover all foreseeable costs, including: bringing a well under control, clean-up, and potential third-party compensation. It uses information which must in any case be prepared as part of the IERP 59 .

The guidelines identify the type of financial instruments necessary to satisfy the required level of capacity acceptable to the regulator, as well as the means of verification of security by the licensing authority.

In the UK, licensees can use different forms of financial instruments to demonstrate financial responsibility. The level of financial responsibility is based on the results of an oil spill cost modelling performed by an external consultant. The modelling uses a range of inputs to determine the level of exposure and subsequent financial responsibility. These include: reservoir characteristics, well fluids, potential direct loss or damage suffered by users of the polluted sea areas, as well as the length of coastline impacted and the estimated volume of oil that may land on the shoreline and associated clean up and remediation costs thereof.

The UK model might help other Member States shape financial responsibility requirements adequate for their environment. It is indeed possible that adequate requirements can be stipulated and implemented at the level of each Member State; however each jurisdiction would be required to identify their specific criteria.

5.13.7Conclusions 

Several Member States did not fully implement the provisions of the Directive on liability, handling of compensation claims and financial security of the licensee. However, in certain Member States, existing horizontal laws and case law may nevertheless include adequate provisions. For clearer conclusions an in-depth assessment of Member States legislation, specifically their civil code, may provide more detailed information. Such an assessment, to be carried out on an individual basis, should take into account data concerning the efficiency of national justice systems. This assessment would aim to identify whether significant differences in the scope of liability, effectiveness, and length of court proceedings can be identified and what consequences these have.

Views from the industrial associations clearly express satisfaction with the current situation of legislation applicable in this context whereas NGOs and the very few citizens who took part in the public consultation, express concerns and propose looking more closely at the option of a European approach (details please seen in the annex, part VII). This is partly in line with the above mentioned resolution of the European Parliament.

The OPOL may serve as an example of how to deal with liabilities going beyond the financial means of the licensee liable for damages, although it has never been used in practice. Clearly, the contribution of OPOL is limited (at $250m) to cover the most likely major accident scenarios in the region but would not be able to cover the extreme major accidents. The UK has produced guidance for industry and regulators on how to comply with Article 4 of the Directive, providing mechanisms for determining liability based upon risk (i.e. the severity levels of geographical locations), and for verifying financial guarantees of license holders. This has been put into effect by the UK licensing authority and may serve as a model elsewhere.

Due to the short period of time since the Directive has been implemented and applied for all installations, there is a lack of practical experience. No major accident leading to major damages has been reported in the last decade. Therefore, it is difficult to draw clear conclusions as to the Directive’s effectiveness now.

Should, however, a major accident occur, the statutory provisions on liability, the handling of compensation claims, and the financial status of the liable party are of major significance for the Member States, the license holder, entities sustaining consequential loss, and citizens. Due to the low level of specificity in this area of the Directive, and often not fully consistent implementation of the relevant parts of the Directive across Member States, national rules and procedures differ. Member States adopt systems in line with their culture and specific regional situation. Although the channelling of liability to the licensee by the Directive provides a high added-value, the Directive contributes only by setting some basic aims for a broader detailed framework of legislation on compensation and financial security that exists to a greater or lesser extent in each Member State. In Member States where operators and owners are not subject to a strict liability regime, meaning that they were liable only if negligence was proved, substantial costs caused by accidents may remain with taxpayers and other parties.

5.14Special theme: Criminal sanctions to breaches of duty to safeguard the environment from major accidents

Introduction

With regard to the Offshore Safety Directive the Commission addressed this matter in its 2015 report to the Parliament and Council 60 and concluded:

“It is therefore too early at present to assess whether penalties to be devised by Member States in the context of the OSD transposition and subsequent implementation will provide sufficient deterrence consistently across the EU, or whether EU criminal penalties would be essential to ensure the fully effective safety of offshore operations”.

The ECD contains obligations for Member States to establish certain environmental offences as criminal offences, if committed intentionally or with serious negligence. To some extent, the Directive harmonises sanctions, as it requires that natural persons are subject to criminal sanctions that are effective, proportionate, and dissuasive. In relation to legal persons, the Directive does not require criminal sanctions.

Under the ECD, Member States must attach criminal sanctions to certain acts that cause or are likely to cause death or serious injury, or substantial damage to the quality of air, the quality of soil, the quality of water, or to animals or plants. However, those acts are only to be criminalised when certain acts of EU legislation that are listed in the Annexes of the ECD are infringed. The criminalised acts include, the illegal discharge of hazardous substances into surface water (if it causes or is likely to cause death or injury to persons or significant damage to the environment), the illegal shipment of waste from the European Union (only if a significant quantity of waste is involved and if there is a clear intention to make a profit out of it), and the illegal export of ozone depleting substances to developing countries. However, activities covered by the Offshore Safety Directive are not included.

The current situation in the EU

As reflected in Article 39(3) of the Directive, this lack of application prompts considerations about the implication of not having certain conduct, leading to offshore accidents under the scope of criminal law through EU legislation. While criminal liability for offshore safety breaches would not directly affect the remediation of damage caused, in theory it may add a separate layer of deterrence beyond environmental civil and administrative liability.

Offshore safety breaches already fall under the criminal code of some focal Member States. For example, the laws of both the UK and Denmark contain provisions criminalising certain compliance failures 61 . However, neither the definition of the criminal offences, nor the minimum type and level of sanctions are harmonized in the EU. There are strict legal preconditions that must be fulfilled before considering whether to criminalise offshore safety breaches through EU legislation. Article 83(2) of the Treaty on the Functioning of the European Union establishes the legal basis for creating minimum rules to define criminal offences and sanctions in a particular EU policy area. This expressly enables EU legislators to adopt: "minimum rules with regard to the definition of criminal offences and sanctions in the area concerned" if this "proves essential to ensure effective implementation of a Union policy in an area which has been subject to harmonisation measures".

The adoption of EU criminal law measures is therefore subject to the assessment of whether they are "essential" to achieving effective policy implementation. As such, the decision to include breaches of the Directive under the scope of criminal law can only follow a thorough necessity and proportionality test on whether criminal law measures would be essential to achieve the stated objective. This cannot be done before more experience with the Directive’s effectiveness has been gained 62 . The Commission is currently doing an ex-post assessment of the ECD, with a view to establish whether the Directive has achieved its objectives to contribute to better protection of the environment. The assessment started in 2019 and will be concluded in the first half of 2020. It will assess results for the time the Directive has been applicable (2011 to 2018) and from all Member States. The focus will be on waste and wildlife crimes, as these are the areas that Member States are most concerned with, and where most data and information exists in the public domain.

Considering major polluting offshore disasters, the offshore petroleum industry has the potential to cause more damage than any other maritime activity to the waters of the EU and its coastline. The NGO’s have argued strongly for criminalisation of behaviour that recklessly or negligently causes a major accident as defined by the Directive. In this context the Commission received a statement by the NGO Consortium:

“In the 2015 Commission report on liability [i.e. the original to this report – COM(2015)422 final, it was stressed that it is important that the Commission returns to the subject of criminalisation in the Directive assessment. The undersigned organisations hold that spills caused by serious negligence should be criminalised by adding major offshore accidents to the Environmental Crime Directive. As held in the abovementioned 2015 Commission report, criminalisation could add a separate layer of deterrence beyond civil and environmental liability, which could improve the protection of the environment and compliance with offshore safety legislation.

It is to highlight that impunity for environmental crimes seriously undermines environmental protection. With the financial muscles of some of the major oil companies, liability with its financial consequences is not always enough of a deterrent. A separate layer is needed, and we ask that this is ensured at this juncture.”

Conclusions

Article 39 of the Directive requires the Commission to examine the appropriateness of bringing certain conduct leading to a major accident within the scope of the ECD. At this point in time, there has been numerous discussions with competent authorities under the auspices of the EUOAG. There has also been public consultation on the subject.

Synthesising the majority of inputs gives the perspective that, in the absence of major accidents and concomitant enforcement activity in the EU, it remains too early to properly assess whether EU criminal law measures would be essential for achieving effective levels of offshore safety in the Union. In order to conclude whether certain conduct leading to a major accident should be brought under the scope of the ECD, more experience with the Offshore Safety Directive’s effectiveness would need to be gained.

The Commission will continue to exchange views with Member States on this issue.

5.15Special theme: Post-decommissioning responsibility for ensuring permanent sealing of wells, and for determining extent of removal of fixed installations

5.15.1Overview

As the North Sea Member States and Italy approach a new era of major decommissioning projects, there is heightened societal awareness and anxiety for the integrity of the decommissioning operations. It is to assess whether there are gaps in the machinery of existing requirements and standardisation addressing the extent of removal and how far the Directive provides rules for the installations’ end of life cycle.

The Directive does not provide definitions of the terms “decommissioning”, “abandonment” and “removal”. To fully understand potential environmental implications of the end of the life cycle of an installation we summarize the common understanding of these terms:

·Decommissioning involves the safe plugging of the hole in the seabed and disposal of the equipment used in offshore oil production.

·An abandoned well is a well that is plugged in permanently due to some technical reasons in the drilling process. An oil well is referred to as abandoned if the economic limit of the well is reached. Thereafter, the tubing of the well should be removed and sections of the wellbore filled with concrete.

·Removing installations means first that the topsides are taken apart and lifted onto the derrick barge. Topsides can be removed all in one piece, in groups of modules, reverse order of installation, or in small pieces. Removing supporting structures is the second step in the demolition process and the most costly. First, divers using explosives, mechanical means, torches, or abrasive technology make the bottom cuts on the piles 15 feet below the mudline. Then the jacket is removed either in small pieces or as a single lift.  63 .

Alternatively, there is the possibility to reuse the platform or leave the cement structure in the sea as an artificial reef.

Decommissioning activities can be explained in four fundamental stages:

·The permanent sealing of the wells;

·The removal (and treatment) of any hazardous substances and waste including drilling cuttings;

·The removal (and recycling or reuse) of the installation's structure and equipment; and;

·The future monitoring and maintenance of the decommissioned site.

Permanent well sealing is addressed directly under the Directive (Annex I, point 6 (4a)) and is discussed in detail below.

To avoid long term pollution, the removal of all hazardous substances (as such or in waste) is to be expected: for example chemicals stored in tanks, petroleum sludge and petroleum mixtures in the closed drain system and storage cells, toxic and irradiating materials and deposits such as barium sulphate (low specific activity material which is found in some formation fluids) and the contents of pipelines connected to the installation.

Following clean-up, the installation's structure and components would be expected to be removed and the recovered components would ideally be reused or recycled onshore. As a general perspective, all structures would be removed to several meters below the sea floor. In addition, here the issue of partial removal is entered, for example where

·Sections may be too heavy for current lifting technology or capacity;

·Too dangerous to be safely lifted such as very large concrete structures and structural footings;

·Parts of the installations were installed with the intention to remain in place.

Once removal is completed, with the end of the installation’s life cycle, it becomes unclear whether the Directive ceases to have effect or whether it requires liable owners of the former installation to carry out further monitoring of potential leaks.

In the event that certain parts of the original structure remain in place, maintenance of the remaining structure is necessary to ensure the relict does not pose a risk for navigation and to the environment. In practice this means that monitoring is required to assure ongoing integrity and to deal adequately with environmental impacts, governed under, inter alia, the conditions of the license following relinquishment.

5.15.2Provisions of the Directive on the decommissioning of installations

Since the Directive covers the whole life cycle of an installation it applies also to the decommissioning phase, both to safety and environmental aspects that are directly linked to potential incidents from decommissioning. However, once the decommissioning is finished, it does not address future environmental concerns.

Furthermore, other legislation as for example the amended EIA Directive applies, which if the requirements of Art. 2(1) thereof are met, covers the whole life cycle of the project, including the demolition phase. Authorities are required to take all relevant legislation into account prior to the issuance of a license.

Subsequent to the interest in the permanent sealing of wells, public interest has arisen concerning the extent of removal of fixed production installations. In such an eventuality, it is determined by the Member States that the physical circumstances of fixture are such that it is justified to leave some (possibly most) of the installation in situ. This eventuality is not addressed in the Directive, nonetheless according to the public consultation there is significant interest in the matter due to its potential implications for the environment and navigation.

The legal provisions of the Directive apply to the decommissioning of an installation as part of a platform’s lifecycle. According to the Directive, the offshore safety regime covers the whole lifecycle of exploration and production activities from design to decommissioning and permanent abandonment (recital 24). It uses the term “decommissioning” in the definition of “offshore oil and gas operations” which are defined as: “all activities associated with an installation or connected infrastructure, including design, planning, construction, operation and decommissioning thereof, relating to exploration and production of oil or gas, but excluding conveyance of oil and gas from one coast to another.” (Article 2(3)).

In order to obtain authorisation for exploring or producing oil and gas offshore, the licensee should submit a major hazard report to the relevant competent authority and request the report’s approval (Articles 12 and 13).

According to Annex III of the Directive on “provisions relating to the appointment and functioning of the competent authority”, in undertaking a thorough assessment of reports on major hazards, the competent authority should ensure that certain conditions are met. The risk management has to take into consideration all relevant stages in the lifecycle of the installation and anticipate all foreseeable situations, including how the decommissioning of the installation will be undertaken (Annex III, point 3 v). Accordingly, the Competent Authority should assess the plan for decommissioning before it grants an authorisation for starting oil and gas production.

Furthermore, in the event of a material change or dismantling of an installation, the licensee is obliged to prepare an amended report on major hazards for the Competent Authority (Article 12(5)). The Member States should ensure that the planned modifications are not brought into use nor any dismantlement commenced until the Competent Authority has accepted the amended report on major hazards for the production installation (Article 12(6)). The same provisions apply for non-production installations (Article 13(4) and 5)).

For taking a fixed production installation out of use, the amended major hazard report should at least include “a description of major hazard risks associated with the decommissioning of the installation to workers and the environment, the total exposed population, and the risk control measures” (Annex I Directive, point 6.4 b). Future environmental hazards associated with decommissioning should thus be taken into account.

As a consequence, the decommissioning is subject to the approval of Member States’ Competent Authorities, which may require measures and procedures to ensure a safe decommissioning. For example, the operator or owner of an installation should submit a description of major hazard risks associated with the decommissioning of the installation to the authorities (Annex I, point 6). In contrast, the Directive does not stipulate whether, to what extent and how the operator/owner should remove the platform.

5.15.3The requirements for extent of removal of fixed production installations 

5.15.3.1The Offshore Safety Directive

The RoMH as accepted by the Member States’ competent authority is only valid provided that the circumstances on which it was based remain unchanged. Where there is a material change, the RoMH is to be amended by the licensee/operator or owner (Article 12 (5) of the Directive). The intended changes may not be put into effect until the RoMH is submitted to and accepted by the competent authority.

Accordingly, for decommissioning any production installation, under the requirements in the Directive, licensees/operators must prepare an amended RoMH addressing the planned decommissioning of fixed production installations on the basis of risk of a major accident occurring as a result of the decommissioning operations. Significant damage to the environment that may arise as a result of a major accident during decommissioning operations and as a consequence of decommissioning must also be taken into account in the RoMH.

An amended RoMH for the decommissioning of a production installation does not determine the extent of removal of the installation. It should demonstrate that the risks of a major accident from the decommissioning phase as planned by the licensee and agreed with the Member States’ licensing authority are ALARP 64 . Nevertheless, risks assessments and measures for management of risks could influence the extent of removal.

Considering the above, it becomes clear that the risk-based mechanisms required under the Directive do not pre-determine the extent of removal of a fixed production installation. Instead, it is a mechanism for assurance that the risks of a major accident from the decommissioning of the installation (including the extent of the planned removal) are controlled ALARP.

The Directive leaves the primary responsibility at the licensee/the operator. If under national law the competent authority was authorised to determine the extent of removal, the responsibility would be shared between the licensee and the competent authority.

5.15.3.2Other EU law

In general, there is no specific EU legislation regulating the extent of removal of installations during decommissioning. Removal is, subject to achieving certain conditions (specifically the obligation to achieve good environmental status under the Marine Strategy Framework Directive) a matter of national policy.

The Marine Strategy Framework Directive (MFD) identifies offshore installations as a human activity affecting the marine environment (Annex III as revised through Directive 2017/845/EU 65 ). More particularly, the main pressures on the marine environment from oil and gas activities include operational and accidental discharges of chemicals, crude oil and produced water but also underwater noise, marine litter including micro plastics and the drilling and placement of installations and pipelines on the seabed. For decommissioning, this concerns in particular the contamination of leakage from plugged wells, and disintegration of abandoned installations. As a result, the impacts of oil and gas activities and in particular of decommissioning on the marine environment, are both the responsibility and obligation of Member States.

Abandoned offshore installations that are anchored onto the seabed are not within the scope of the Waste Framework Directive (WFD) 66 , given that Art 2(1) (b) excludes buildings permanently connected with land. The notion of “land” in this context covering also the seabed. However, movable property that the holder discards or intends/ is required to discard, such as the contents of storage cells and drilling cuttings, could be subject to the WFD. Moreover, given the nature of the contents of such storage cells (oil and oily water and residues) these often can be classified as hazardous waste.

The Ship Recycling Regulation 67 addresses floating offshore installations and requires they be dismantled in EU-listed yards if they are flagged to an EU Member State. This is a legal obligation since 2019, resulting from the full entry into force of the Regulation.

The Environmental Impact Assessment Directive (EIA) 68 applies to the whole project, including its dismantling. For projects after May 2017, it requires the application of monitoring measures for projects with significant adverse effects, applying therefore to decommissioning sites, the question here being raised whether decommissioning should be considered as a new project, to which this provision applies, or as part of the original project (in which case this requirement would not apply).

Other environmental directives also apply to decommissioning offshore installations including the Environmental Liability Directive. This Directive addresses the licensee’s sole liability, and obliges them to prevent damage in case of imminent threat (and remedy damage if it occurred already). The Birds and Habitats Directive 69 , mandates a step-by step assessment of plans and projects (including decommissioning of sites) for their effect on Natura 2000 70 sites, and compatibility with a favourable conservation status of habitats and species. In relevant circumstances, also the Strategic Environmental Assessment Directive 71 and the Maritime Spatial Planning Directives 72 apply.

5.15.3.3International policies 

All European governments’ policies for the extent of removal are in alignment with international conventions. These conventions and public expectation call for total removal of decommissioned installations as the default condition.

Not all international conventions, which are further summarized below, are ratified or equitably enforced throughout the EU. Of the EU Member States’, with offshore oil and gas activities in their jurisdiction, Denmark, Germany, Spain, France, Ireland, the Netherlands, and Portugal, are contracting parties to the OSPAR Convention 73 . Germany, Denmark, and Poland are contracting parties to the Helsinki Convention; only Croatia and Cyprus have ratified individually the Offshore Protocol to the Barcelona Convention, covering all coastal states in the Mediterranean area, EU and third countries. However, by virtue of ratification by the EU of this protocol, all Member States are legally bound.

Under the relevant regional seas convention of the Member States, which specifically target the protection of the marine environment, the protocol of decommissioning methods presumes total removal of the installation and restoration of the sea bed and water column. But more explicitly, the goals are the protection of navigation and other economic activity in parallel with protection of the marine environment. These are matters of policy pertaining to the restoration of the environment at the end of an episode of industrial use, and not an outcome of case-by-case risk assessment.

Concerning the alignment of national policy with international conventions, the OSPAR convention and IMO guidelines include provisions for the post-decommissioning phase on monitoring. However, obligations under various instruments in the EU environmental acquis apply to post decommissioning, and indeed to matters that bear on Member States’ policy regarding the extent of decommissioning or removal of fixed structures and detoxification of the relicts.

The OSPAR decision 98/3 74 prohibits dumping or leaving wholly or even partly in place installations that are taken out of use. It allows for derogations for certain categories; and there is a mechanism for considering alternative disposal options. Alternative disposal options have been considered for installations defined in Annex I 75 of the decision, where justified on the basis of an alternative options assessment 76 . In this case, the contracting party may issue a permit for such a derogation after having first consulted OSPAR contracting parties on the decision. If one of them expresses an objection, a mediation shall be organised and eventually a consultative meeting shall be created if required by at least two contracting parties. Nonetheless, the final decision is left to the contracting party whether to permit the alternative option.

Regular review of this decision is foreseen by the decision itself every 5 years based on new knowledge and technological developments for decommissioning. It was last discussed at the 2018 Meeting of the OSPAR Offshore Industry Committee (OIC).

The 1982 UN Convention on the Law of the Sea (UNCLOS) 77 requires safe and sustainable removal of all or part of decommissioned installations having regard to safe navigation, other users of the sea and protection of the marine environment. Along with sovereign rights over exploitation of natural resources, states have obligations to protect and preserve the marine environment.

The 1989 International Maritime Organisation (IMO) guidelines and standards for the removal of offshore installations 78 establishes the general requirement of full removal except where partial removal options are consistent with certain guidelines and standards. Importantly, the IMO standard addresses the permanent integrity of any remaining structures, i.e. stability and degradation over time in the sea.

Furthermore, the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 1972 79 , and the 1996 London Protocol to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter (which is to replace the 1972 Convention, subject to ratification) both apply. The 1996 London Protocol reflects the global trend towards precaution and prevention and the “polluter pays” principle. It has a general ban on dumping of waste, but with exemptions for some specific categories of waste based on consideration and permitting procedures to be carried out by the national authorities. In order to assist the national authorities in such assessments, the London Protocol has developed Guidelines for the relevant waste categories.

Subject to assessment, offshore installations and other man-made structures at sea are among the categories that may be considered for dumping into the sea, instead of removal, according to these Guidelines. The London Protocol also has Guidelines on artificial reefs. Should installations be considered to be 'reused' as an artificial reef, this would require compliance with the Guidelines.

The existing 'Specific Guidelines for assessment of platforms or other man-made structures at sea 80 ' were issued in 2010, and were up-dated in 2019. 81 The London Protocol itself is not up for revision, so the new guidelines cannot appear stricter than the Protocol itself.

Other international agreements and conventions apply to the decommissioning of installations. Leading works are the Geneva Convention on the Continental Shelf 1958 82 and Basel Convention on Control of Transboundary Movements of Hazardous Wastes and their Disposal 1989 83 .

The 1992 Helsinki Convention on the Protection of the Marine Environment in the Baltic Area 84 , requires zero discharge during decommissioning and removal of installations in an environmentally friendly manner. The EU, Germany, Denmark, Estonia, Finland, Lithuania, Latvia, Poland Russia and Sweden are contracting parties of this Convention.

The Barcelona Convention for the Protection of the Mediterranean Sea against Pollution 1976 85 has a specific Protocol on offshore exploration and exploitation activities. This Convention requires the removal of installations so as to ensure safety of navigation, compliance with guidelines and standards of competent international organisations, and regard for other economic users, the marine environment and rights and duties of other contracting parties. There is an obligation to prevent discharges.

For the removal of installations, countries operating in the North Sea and North Atlantic pay full attention to the OSPAR convention. In the convention’s framework Member States are bound to consult both in writing and in formal meetings how best to apply OSPAR guidance. Currently OSPAR members are working to clarify provisions (e.g. by developing a catalogue of criteria) that facilitate the decision making process and enable a consensus on cases where installations may remain in situ after the decommissioning.

5.15.3.4Current practice of decommissioning

The OSPAR region serves as an illustrative case for the functioning of decommissioning decisions vis a vis removal. The most problematic installations are legacy designs that would not be installed today, but for which nonetheless, solutions must be found. The OSPAR region covers the northern Atlantic of the UK to Portugal, with 1,357 active installations. Of these, 22 are concrete gravity based, and 58 are steel jackets weighing more than 10,000 tonnes in air, potentially covered by the scope of article 3 of OSPAR decision 98/3 defining derogations to the principles of complete removal. It appears that all other installations can be physically removed.

Between 2002 and 2014, 170 installations have been decommissioned, with 9 derogations granted and a further one in the initial stage. Of the 9 installations, 5 are gravity concrete structures, and 4 are of steel construction.

On the issue of safety, it is unlikely that thorough clean-out becomes a major accident potential hazard 86 . However, the framework of Directive 92/91/EEC 87 applies to work planning for worker safety; the specific measures in Part C (special minimum requirements applicable to the offshore sector) notably at sections 1 and 12 ensure continuing protection of the safety of workers outside of the major accident envelope of the Directive, in both normal and ‘critical’ conditions. Directive 92/91/EEC does not address environmental factors that need not necessarily be taken into account in these circumstances.

On the issue of technical capability, the EU environmental acquis, and conventions such as OSPAR and IMO pay due regard to the stability of the partially removed structure over time, and also require keeping the technical capabilities under review and to revisit decisions on decontamination. Whereas it is self-evidently necessary to monitor the relict of the installation to ensure structural stability and ongoing containment. The EU-level legislation and international conventions do not address whether or not there must be an effective interval and effectiveness of submarine surveys.

It appears that in some Member States the tax payer may have to contribute to the cost of decommissioning. Accordingly, on cost for the removal, the independence of the relevant authority of the Member States in taking decisions that are free of conflict of interest may become a point of discussion.

With regard to the OSPAR convention, environmental NGOs challenge the rigour in the decision making processes for derogations, and challenge the thoroughness applied to the obligation to protect and preserve the environment falling to Member States. The methodology for evaluating decommissioning options are discussed in OSPAR, aiming at more harmonised approaches to be applied by the Contracting Parties.

Particular concerns are raised concerning the dismantling of mobile installations. The press reported on bad examples of mobile installations being broken up in third countries causing a significant toll of human life and environmental degradation. There are recent examples of mobile production installations removed from the EU to undesignated breaking ports, potentially not in line with the Ship Recycling Regulation.

5.15.3.5The decommissioning of Brent platforms

According to the industry and the Competent Authority of the UK, Brent platforms have a weight which does not allow lifting and removal with currently available technologies. The authorities examine which of them may remain in the sea “in situ”.

The example of the Brent platforms illustrates the difficulties arising from the lack of an existing harmonized legal framework at EU level and the shortcomings of existing international legislation.

As the owner of the Brent platforms Shell prepared the following decommissioning activities:

·Plugging the 154 wells across the Brent Field;

·Removing the platform’s topsides;

·Recovering oil and gas debris from the seabed across the Brent field;

·Removing the oil – known as ‘attic oil’ – trapped at the top of some of the storage cells;

·Cutting the upper portion of the Brent Alpha steel jacket;

·Leaving in place the Gravity Base Structures (GBS), Brent Alpha footings, the drill cuttings and GBS cell contents.

Pursuant to OSPAR Decision 98/3, Shell informed the UK authorities that, due to the safety risks and lack of appropriate technology, they intend to leave in place, inter alia, a significant quantity of oil and oily residues in storage cells (around 640 000 m3 of oily water and 40 000 m3 of sediment containing 11 000 tonnes of crude oil), as well as drill cuttings and concrete platform legs, after the decommissioning of the Brent field. The UK considers the Shell request justified and informed other OPSAR Contracting Parties of its intention to grant a derogation under the above-mentioned OSPAR Decision.

Following a formal objection from Germany to this derogation (based on a report from independent experts), a bilateral meeting between Germany and the UK took place in June 2019. Germany, supported by other Contracting Parties, then requested that a special consultative meeting on the Shell Brent decommissioning be arranged 88 . The special consultative meeting between UK, Germany and other interested Contracting Parties took place on 18 October 2019.

Germany’s concerns address procedural issues (e.g. biased comparative assessment of options, insufficient transparency regarding documentation, inadequate response to stakeholder concerns), and the plans to leave in situ the oily residues in the storage cells, parts of the metallic platform, and the concrete based platforms as well as other residues (such as drill cuttings).

During the OSPAR consultation process, but also directly through bilateral exchanges with the UK administration, the Commission expressed concerns regarding the leaving in situ of parts of installations. In particular the Commission was concerned about the option proposed by Shell to leave in place the content of the storage cells, which could qualify as hazardous waste according to EU law, as well as the potential cumulative effects of decommissioning activities in the northeast Atlantic.

The special consultative meeting of OSPAR on 18 October 2019 highlighted knowledge gaps and the need for additional information on the storage cells’ contents and on the availability of technologies to extract the residues from the cells.

With regard to the question of whether there are gaps in coverage and where these are found, there are numerous conventions, guidelines, and standards addressing safe, sustainable decommissioning of production installations. This information covers a diversity of issues, including: securing the integrity of the marine space for further economic use as well as the protection and preservation of the environment. In assessing disposal options it is necessary to consider what management measures might be required to prevent or mitigate adverse consequences of the disposal at sea, and shall indicate the scope and scale of any monitoring that would be required after the disposal at sea.

Member States take different views on whether current provisions are adequate for ensuring that installations are removed safely and to the maximum desirable extent, whereas industry clearly does not see the need for additional rules. Less clear is the subject of detoxification of remnants of installations subject to only partial removal, as demonstrated in the example of the Brent case. Furthermore, this case demonstrates the need to further examine all risks involved with emptying fuel storage cells in deep sea, both for the workers and for the environment. Additional analysis may determine which level of costs for a thorough decontamination may qualify as being prohibitive for to the state and the license holder (e.g. risk of bankruptcy).

5.15.4Conclusions

The example of the Brent platforms demonstrates that international rules are in place but that they leave a large margin of discretion on the final decision on the removal of a platform.

Under the Offshore Directive, operators of fixed production installations (and the very few owners of fixed non-production installations) are required to submit an amended RoMH to the competent authority, addressing all aspects of decommissioning (e.g. wells, structure, hazardous materials.) The operator is not allowed to proceed with the intended operations until the competent authority has accepted the amended RoMH. Many other consents and authorisations are required from the Member State prior to decommissioning, due to either national legislation or international obligations. Once the decommissioning is complete and the structure removed, the Directive ceases to apply as there are no relevant activities under the Directive. However, other conditions continue to apply regarding the operators responsibilities for seabed surveys and so on, pursuant to licensing regulations and other national and international legislation.

Whereas OSPAR’s general principle is full removal and partial removal is a derogation from the general principle, the Directive does not address the matter of whether a fixed structure should be partially or wholly removed. This is entirely consistent with the Directives aim to prevent major accidents, including to the environment, by reducing risks ALARP. For example, it may be demonstrated that the risks of attempting full removal of a structure are intolerable under current knowledge and technical capability, or that the risks are significantly higher than partial removal.

The decision on the extent of removal is therefore remitted to other parts of the Member States legal framework, and the Directive will be applied to ensure the major accident risks are ALARP for the selected method (and if not ALARP, a different decommissioning plan is to be formulated).

In the context of discussions in OSPAR, the Brent case points to potential gaps in EU legislation. These may create an uneven playing field between EU regions that may be subject to different protocols in their respective sea convention. This issue would need to be carefully assessed in the future in view of the upcoming decommissioning projects, in particular in the North-East Atlantic. The Directive includes an important measure pertinent to decommissioning. At the stage of bringing a new production installation into use, the operator is to provide information concerning the decommissioning of the installation at the end of field life in their RoMH (Article 12). The assumption is for total removal under the recent conventions and protocols and EU law. The competent authority, when conducting its thorough assessment of the RoMH must, by virtue of the Directive’s Annex III(3)(c)(v), take into consideration how the decommissioning of the installation will be undertaken. Whilst the decommissioning plans cannot be known in detail at the commissioning stage, the main concepts must be made part of the original design intent.

Above analysis takes into account the whole framework of the existing obligations under other relevant legislation, specifically the EIA Directive, which, if the requirements of Article 2(1) thereof are met, addresses the issues of public consultation, the demolition phase and also monitoring. Therefore, the presumption is that no new installations will be accepted for use in EU waters where they are not capable of being fully removed at the end of their life. For the future, this would secure, throughout the Union, an obligation for commissioning new installations that are so designed as to be totally removed at the end of the installation’s life. However, this does not address the “legacy” issues of older installations that have been built in the 1970’s and which must now be decommissioned, such as the Brent installation in the OSPAR region. 

Doubts remain as to whether the Directive, also in the context of international conventions, is sufficiently effective in setting adequate rules for decommissioning. Further work appears necessary to address remaining questions:

·Is there sufficient understanding of the whole of the framework of obligations that exist under EU and international law, and is this framework appropriate?

·The standards that exist, are they capable for protecting the marine environment from the after-effects of offshore oil and gas production?

·Does the licensee/operator community, and just as critically, the Member States’ authorities for decisions on removal, embrace the entire framework, and are they responsive to evolving expectations?

·Should more clarity be provided regarding the frequency and effectiveness of seabed surveys where there is full removal, in addition to surveying of the integrity, environmental impacts and environmental risks of partially removed installations? What are the obligations for regular monitoring by the licensee and liabilities when installations change ownership in future decades?

The same questions are to be asked regarding the permanent sealing of wells, which remains an integral part of decommissioning. In the forthcoming wave of decommissioning, it is vital that the public can have full confidence that the competent authority is free from a conflict of interest, when exercising its function to accept risk assessments relating to the permanent abandonment of production installations and their wells.

In addition to the rigour expected of Member States in coming to decisions on safe and sustainable decommissioning, Member States need to adopt more transparent obligations into their legislative policy.

At the current stage of analysis, there are arguments in favour of creating additional standards for the degree of removal of offshore installations that would in effect, reinforce obligations that already exist on license holders and Member States. This would reduce potential environmental risks associated with leaving contaminated residues in the sea bed as well as potentially damaging cumulative effects of decommissioning activities in the marine environment.

5.15.5The permanent sealing of wells

5.15.5.1The Offshore Safety Directive 

Notwithstanding the current application of the Directive to the dismantling and/or removal of production installations, there is no specification for the temporal meaning of ‘permanent sealing of the wells from the installation and the environment’, when wells on fixed production installations are to be abandoned, as referred to above.

However, the duty to permanently seal the wells from the environment is stated in these exact terms solely in respect of wells connected to a fixed production installation that is to be taken out of use. Otherwise the permanent sealing of the wells is considered an implied duty residing in the term ‘permanent abandonment’ (Annex I Part 6(4)(a)) 89 . There may be a difference in understanding of the terms ‘permanent abandonment’ and ‘permanent sealing of a well’.

The Directive applies to all petroleum activities carried out on offshore installations, including all well abandonments. Leakages from wells or near installations is a clear major hazard, and is covered by the Directive. When the MODU leaves location, or the production installation is removed, the Directive ceases to apply. Should there be a subsea leak from an abandoned well in EU waters requiring a MODU to return to remedy the leakage, then the measures pertinent to the Directive re-enter into effect.

5.15.5.2Technical challenges and available technologies

Well seepages (from reservoirs, not shallow gas seepages) and more energetic escapes of reservoir fluids at the sea floor are not identified as an issue of concern by Member States’ or by license holders. But, with what is becoming seen as a ‘wave of plug and abandonments’ looming for the North Sea region in particular, there is a heightened societal interest in decommissioning, coordinated by environmental NGO’s. In order to ensure the primary aim of permanently restoring the environment at the production site the most important element of the decommissioning process is to permanently seal the wells.

Isolating the zones of flow potential from each other and ultimately from the seabed by the placement of permanent barriers in the well bore and the spaces between the well casings, is the overall purpose of the plugging and abandonment process. After this process is complete, it is intended that no further leakage or seepage would be possible between the zones of flow potential or to the sea floor. Should well fluids reach the sea floor they will either be dispersed into the water column or, in shallow water or where the seep rate is high, to the sea surface. Fluids would induce a potential contamination of the marine waters, which would therefore have to be monitored in the context of the Marine Strategy Framework Directive (MFD).

Standards for permanent abandonment of wells have been updated continually over the 65-year lifetime of the offshore sector, in the form of authoritative global standards and best practices under ISO, API, NORSOK, and the Energy Institute. Additionally, the Directive sets international best petroleum practice through the requirement for a scheme of independent verification of well design, which applies equally to permanent abandonment.

In some Member States’ jurisdictions, decisions and actions taken during the plugging and abandonment are required to be fully documented, and records retained. Changes to plans must also be referred to independent well examiners for a second opinion concerning integrity.

For context, there are less than 1,000 active onshore wells in Europe, most of them in the Netherlands, UK and Poland. It is difficult to identify the number of abandoned wells in Europe, but in the UK and the Netherlands the total is between 5,500 and 6,000. There is not a significant recorded history of leaking from permanently abandoned wells in the EU. The Netherlands recently published a report on methane leakage 90 where 185 wells of the 1,312 abandoned wells in the selected areas were studied in detail. The report concluded there is no evidence of any leakages from the abandoned wells in the study. Overall, in Europe, there are recorded minor incidents of hydrocarbon leaks from abandoned oil and gas wells in the past, however, there is no authoritative data on frequency or type. As a result, no major environmental accident potential has been identified at off or onshore well locations in north Western Europe.

However, the raised and levelled standards for preventing the risks of a major accident from wells by virtue of the Directive are highly relevant to the increasing volume of well abandonments in the offshore waters of the EU. Modern offshore wells are considerably more complex in their architecture than the vast number of abandoned older wells in both Europe and elsewhere.

Competent authorities required to assess RoMHs for abandonment of production installations should take particular interest in the risk assessments, planned measures, and barrier integrity assurance procedures for well sealing as a precursor to permanent abandonment. These issues are relevant for of HPHT wells and all wells of complex design, or where internal integrity problems are known from the well’s history. The schemes for independent examination of well plans will need to consider these factors.

The so-called ‘wave of plugging and abandonments’ upcoming in the North Sea region to which is referred to above, will undoubtedly place cost pressures on operators. Where field abandonment costs are defrayed through concessions (wherein the state allows liable parties’ revenue tax payments to be set against abandonment costs) a high proportion of the abandonment costs will become internalised to the Member States, placing pressures on the economic regulator.

Therefore two things become apparent. Firstly, in order to fully address environmental concerns, operators of development wells may prepare convincing risk assessments for permanent sealing of the wells on installations that are to be decommissioned. In a further step, independent experts would then verify the well plans’ risk assessments. At the end of the procedure, the competent authority may then issue a decision on the risk assessment incorporating the permanent sealing of the wells before any decommissioning work may start.

Secondly, it is vital that the public can have full confidence that the competent authority appointed under the Directive is entirely free of influence. This issue principally regards cost pressures confronting the operators and the economic regulators of the Member States when assessing risk assessments relating to the permanent abandonment of production installations and their wells.

5.15.5.3Conclusions

There is an absolute duty to ensure the well is sealed permanently when abandoned. This is one of two absolute duties of the Directive, where the standard is not qualified by the ‘reasonably practicable’ condition. The other duty is to rescue personnel from a stricken installation (that would include the immediate sea vicinity) ‘so as to secure a good prospect of personal safety and survival’ (Article 28(4)).

Given the potentially vast financial liabilities accruing to parties involved with the abandonment (including potentially the state), further research may provide proposals for best means. This could help ensure that all development wells are permanently sealed from the environment as a consequence of the removal from use of any production installation.

5.15.6Biogenic methane seepage

Offshore methane seepage mostly happens due to natural processes and geology. With regard to industrial activities; explorative drilling, as well as oil and gas production may have a causal link to methane seepage and increase the emitted volume of gas. This is an issue principally because methane breaks down ozone through a destructive chemical chain reaction, contributing to ozone depletion and subsequently climate change. Furthermore, the same as carbon dioxide, methane absorbs the sun’s heat and warms the atmosphere. Recently, attention has been drawn to shallow gas seepages from the central North Sea region where there is a dense cluster of shallow gas pockets. A study conducted offshore by the GEOMAR institute 91 has attracted interest on environmental grounds. It observed seepage of biogenic gas at locations of abandoned wells in the North Sea, which the study attributes to the well's trajectory through shallow gas pockets. In other words, the penetration of the pocket of gas by the well creates a pathway to the sea floor around the outside of the well. On the occasion of the Geomar study, the three wells were exploration wells, however there was a significant eruption of shallow methane under a production platform (the Forties Delta platform (UK)) in 1983. On this occasion, the penetration of a shallow pocket in the central North Sea region was conducted directly underneath the platform, causing a massive explosion and fire, in which 9 workers were seriously injured.

A response to the Geomar study made by industry challenges the methodology of the Geomar study, claiming it extrapolates.

Biogenic methane accumulations are covered by the Directive should the gas pockets be in the well trajectory as identified from shallow focussing geophysical surveys, or known to be a local hazard and therefore taken into account in the risk assessment of the well plan and incorporated into the scheme of independent verification of it. The preferred control method (i.e. relevant to the hazard) is to move the well and therefore avoid the shallow gas pocket 92 .

Biogenic methane seeps are not relevant under the Directive in the post-decommissioning period where qualifying installations are not present. Such seeps per se are not major hazard events as related to the Directive because there are no qualifying installations stationed at the location. However, should the seepages be sufficiently serious as to require the deployment of a qualifying installation (a drilling MODU for example) to intervene then the Directive returns into effect. There is no recorded event where a biogenic methane seep has caused an intervention by a MODU or other qualifying installation.

Whilst methane seeps, are unlikely to have the potential to create a major accident hazard, they would potentially be subject to environmental scrutiny under the broad acquis of other EU environmental legislation (e.g. MFD, EIA/SEA and ELD).

5.16Special theme: Mutual recognition of mobile drilling units (MODU)

Analysis

As we have seen in previous thematic discussions, there has been quite wide variation in approach. For example, in the contents of corporate major accident prevention plans and in combining safety and environmental functions in the competent authority.

The recognition between Member States of a mobile production installation (overwhelmingly a MODU) that has a RoMH accepted by another Member State, is a criteria for attaining the desired goal of a level regulatory playing field throughout the EU.

In the Offshore Safety Directive the relevant measure is contained in Article 13 on the “report on major hazards for a non-production installation”. As mentioned above, the measure relates predominantly to drilling rigs (MODU’s), referring to a common acceptance approach between Member States of compliance with Directive related measures.

The principle of common applications also applies to systems deployed by operators on production installations where such systems are not Member State specific. The information received from duty holders is that the outcome from implementation of the Directive is the opposite to that which was intended:

·In general, operators/licensees operating production installations or well operations in more than one Member State report additional burdens following the introduction of the Directive.

·Specifically, industry reports that MODU movements between Member States are delayed by the authorities of Member States, who conduct thorough assessments of RoMHs after each new entry of an MODU into their jurisdiction.

·MODU’s returning to the same Member States that issued acceptance within the previous compliance interval (5 years), are also reportedly subject to a lengthy re-acceptance process.

·Operators and owners report CMAPP (Corporate Major Accident Prevention Plan) requirements vary indiscriminately between Member States, creating an administrative burden for duty holders working in more than one Member State.

·In some contradiction to the preceding points, Member States report that a procedure is ‘type-based’ and fast-tracked for returning, previously accepted MODUs.

·Some Member States suggest they would acknowledge other Member States acceptance of a RoMH for MODU’s, subject to strategic checks and reviews of additional Member States requirements, where these may exist.

On the positive side it appears that in line with the Directive, all Member States request RoMHs’ and associated productions such as the CMAPP.

Notwithstanding the obvious advantages in resource management, and indeed the higher goals under the pursuit of an internal market (vis a vis TFEU), it seems that Member States are reluctant to explore solutions to freer movement of MODU’s.

It is, on the other hand, clear that there are variations of social requirements between different Member States. For example in the arrangements for single cabin accommodation, or in requiring additional capacity of escape capsules. However, we believe it is necessary to discriminate between the technical components in the RoMH and the additional social components (single occupancy cabins) and emergency response (escape capsule seats) that a Member State may require.

In the Commission’s discussions with stakeholders, all duty holders support the concept of an internal market for MODU’s and are therefore disappointed that the situation has reversed since implementation of the Directive.

Considering that the fixed capabilities of the MODU for the geological and geographical conditions are acceptable for the proposed location, it is difficult to envisage what is the added-value of the receiving Member States duplicating a thorough assessment of the MODU under the Directive. It could easily accept the RoMH of the MODU that has already been accepted by the Competent Authority of the dispatching Member States that has itself conducted a thorough assessment under the Directive. Given estimates for handling of a MODU RoMH by duty holders is estimated around Euro 200,000, the subject is valid for consideration.

Should there be additional particulars required by the receiving Member State regarding number of escape craft and single occupancy cabins and so on, these matters could be addressed as an addendum to the accepted RoMH. There ought to be, in any case, a quality assurance exercise for the record of the receiving Member States.

Some Competent Authorities appear to merge the RoMH assessment with validation of the well plan. An MODU rated to be able to undertake the well plan and having an accepted RoMH albeit accepted by another Member States’ Competent Authority, is in effect prequalified to execute that well plan.

Conclusions

No technical case was identified for a Member State to undertake a full assessment of an MODU for the acceptance of a RoMH that has been approved within the previous 5 years by another Member State.

The current status appears out of line with the aims of the internal market. Nonetheless, it seems difficult to alter the status quo, should Member States not voluntarily acknowledge their mutual authorisations of offshore installations. The pursuit of a level playing field will certainly be thwarted if Member States do not reinforce their ambitions in that area.

There is also an identified impact of differential implementation of provisions by Member States, requiring duty holders to amend the intent of certain measures (such as the corporate major accident prevention policy) to satisfy additional particulars to those in the Directive’s relevant annex. Such differential measures ought to be made transparent by the Member States requiring them.

The situation should be kept under review. More information should be gathered by the Member States which have additional requirements and by industry, which claims to have to deal with unnecessary administrative burdens.

6Achievements assessed by horizontal criteria

6.16.1Overview 

Further to the analysis by themes, for assessing the achievements of the Directive, the Commission has used five criteria 93 :

Relevance looks at the relationship between the needs and problems relating to the societal segment targeted, namely the maritime and coastal users and the environment where the offshore petroleum activities occur, and the objective of the intervention.

Coherence is a factor of the external coherence with other EU legislation and policy, and where relevant, at the Member State or International level. It also is an indicator of how different components of the Directive, as implemented, operate together to achieve particular objectives.

Effectiveness analysis considers how successful the Directive may have been in achieving or progressing towards its objectives. Where objectives may not have been achieved, the assessment will attempt to assess the extent to which progress falls short and attempt to explain the shortfall.

Efficiency is meant as the relationship between the resources required to execute a measure and the gain (i.e. an assessment of costs and benefits). The cost-benefit analysis will be quantified where possible and identify reductions or increases in regulatory burdens.

EU-added value is a deduction of the relative efficacy between the implementation of the directive, and the Member States acting alone in regulating the offshore sector’s control of major accident risk.

For the analysis by criteria, the assessment is guided by questions which were addressed for each of the themes. The following sets of questions were applied for the different parts of the analysis:

Relevance

·To what extent is the intervention still relevant?

·Did the change in framework conditions for offshore operation make the Directive less relevant?

·To what extent have the original objectives proven to have been appropriate for the intervention?

·How well do the objectives of the intervention correspond to the needs within the EU?

·How well did the intervention reduce the risks for accidents and the number/quality of offshore accidents?

·How relevant is the EU intervention to EU citizens?

Coherence

·To what extent is the intervention internally coherent?

·Specifically, how far is the intervention coherent with environmental legislation?

·To what extent is the intervention coherent with wider EU policy?

·Specifically, to what extent is the intervention coherent with environmental policy?

·To what extent is the intervention coherent with international obligations?

·Specifically, to what extent is the intervention coherent with international conventions of offshore operations?

EU added-value

·What is the additional value resulting from the EU intervention, compared to what could reasonably have been expected from Member States acting at national and/or regional levels?

·What is the added value from avoided accidents, which may have caused damage, environmental pollution, direct and indirect economic losses?

·What is the added value from the intervention regarding public acceptance of offshore oil and gas operations?

Effectiveness

·What have been the effects of the intervention?

·How far did the intervention contribute to the avoidance of accidents?

·How far did the intervention reduce the risk of accidents?

·How did the intervention influence public perception and support for offshore operations?

·To what extent do the observed effects link to the intervention? Or do you attribute them to different causes?

Efficiency

·To what extent are the costs associated with the intervention proportionate to the benefits it has generated?

·What factors are influencing any particular discrepancies (e.g. regional) of the intervention’s effectiveness?

·How do these discrepancies link to the intervention?

·To what extent do factors linked to the intervention influence the efficiency with which the observed achievements were attained?

·What other factors influence the costs and benefits?

6.16.2Relevance

The intervention has caused a comprehensive overhaul of EU offshore petroleum legislation to bring it at least up to the most relevant jurisdictions that practice major accident prevention (e.g. UK, Denmark, Italy, and Netherlands). However, the intervention has not encouraged Member States to make steps towards adjustment of liability provisions. 

Regarding the aims of the Directive, there is good qualitative and quantitative evidence from competent authorities and industry to suggest that the measures in the Directive remain highly relevant to introducing global best industry practices in the EU. This is particularly relevant for prevention and mitigation measures, introduced to ensure that the risks of a major accident in EU waters are reduced as far as possible. The intervention has directly addressed coordinated national contingency planning, with industry emergency planning and response systems.

No information was received suggesting that the best practice measures under the Directive have been superseded or are no longer relevant. The intervention attempts to maintain relevance by setting aims and goals, rather than prescribing detailed measures. This provides scope for responsiveness to new knowledge and technical innovation, keeping the Directive applicable as the sector develops. Moreover, transparency provisions open the sector to greater visibility and scrutiny by civil society in the EU.

6.16.3Coherence

The intervention is aligned with wider EU legislation for the safety of workers, assignment of liability, and protection of the environment. The implemented measures co-exist comfortably with occupational safety and environmental protections under EU law.

The Directive strictly focuses on preventing major accidents. Occupational safety and day-to-day environmental protection are adequately provided for in other legislation. The intervention’s measures are consistently adapted from global best international offshore petroleum practices for industry and regulators, enabling verifiable tests of these measures.

Furthermore, levels of coherence with related EU legislation were evaluated. Concerning worker protection from a major accident (i.e. an accident with multiple serious injuries and/or fatalities), the intervention has prompted Member States to replace the Safety and Health Document previously required under Directive 92/91 EEC (Mineral Extraction Through Drilling Directive 94 ). This has been superseded by an ex ante risk report for each installation, to be verified by the competent authority prior to commencement of activities on the installation.

The EU intervention has compelled Member States to extend liability for water damage to the extent of the exclusive economic zone 95 (previously limited to territorial waters). This change has established an unambiguous coherence with the functioning of the Environmental Liability Directive in other sectors.

Regarding coherence with wider EU policy, the intervention’s requirements to implement best international practices for regulators and industry ascribes responsibilities to entities that control the risks of major accidents, and for the assurance that major accidents will be prevented. This is in line with the integrated maritime policy to create a level regulatory playing field for petroleum activities in all EU offshore waters, and requires good governance jointly with maritime spatial planning.

Under the broad generic framework of EU environmental legislation, there is intentional coherence of the Directive’s responsibilities on owners and operators with the Environmental Impact Assessment Directive relating both to preventive measures and emergency preparedness and response.

Regarding coherence with international obligations, the intervention allows application of external protocols and obligations relevant to the sector. These, least effect day to day operations, and most effect navigation of mobile installations, emergency preparedness and response, cross-boundary pollution prevention, and decommissioning of installations including detoxification of partly removed structures. For example, in the context of safety, the Directive’s internal coherence means that it does not regulate the extent of decommissioning, which usually does not directly affect safety, but it does regulate for control of risks of a major accident during the activity. The issue is pertinent as a wave of decommissioning is underway and key standards, e.g. the 1996 London Protocol to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter 96 , are being updated.

6.16.4Effectiveness

The effectiveness of the EU intervention has been in securing a levelled regime that takes into account global best offshore petroleum practices for industry and regulators for preventing accidents. The Directive has set the necessary conditions to reduce the likelihood of a major offshore petroleum accident in EU waters. Despite the largely adequate quality of implementation by Member States, overall implementation has not always been fully consistent. The Commission services are engaged in a formal dialogue with Member States to address these concerns.

The Directive has clear, direct effects for a number of reasons. Firstly, the intervention creates explicit responsibilities and liabilities for the license holder, operator, mobile installation owner, and contractors. Secondly, it mandates the assignment of a Competent Authority to conduct oversight functions, and finally, the Directive introduces a verified risk report for every installation. These are the most fundamental elements by which a major accident will be prevented in EU waters.

Public consultation and expert meetings undertaken in this assessment suggest that more effective integration and interfaces have been built amongst and between duty holders in industry and regulators, as a direct result of the Directive. These qualitative findings are complemented by quantitative date from the first two annual EU-wide reports of incidents in the offshore petroleum sector. For the first time at EU level, they provide new statistical data on accident risk, thanks to the Directive and its Implementing Regulation. At the current stage of analysis, drawing on the data from these two annual reports, the safety level of EU offshore petroleum sector appears adequate.

Furthermore, the Directive has had extended effects on regulation and reporting. It is apparent that a strong legal hierarchy of duty, an expert regulator, and the obligation to undertake a verified risk report for each offshore installation, forms an effective template for risk control across the EU.

The intervention has led to a horizontal adoption of best international practices by operators/owners and competent authorities within key areas. For example, in safety and environmental management systems based on risk control, as well as the incorporation of independent verification of critical control systems and well drilling plans. The Directive also impacts duty holders, obliging them to report on major accidents in the EU. Moreover, it is evident from this assessment that corporate policy amongst duty holders at the EU level is often mirrored in their operations at a global level, improving global standards of incident reporting, for example. The implementation of the Directive occurred over a period where price of oil dropped dramatically to a steady low level. In absence of the Directive, the resulting cost squeeze may have risked compromising the high level of risk control.

Following the Gulf of Mexico disaster that triggered this EU intervention, there was an unprecedented wave of industry initiatives in technical equipment and in measurement that focused on major accident prevention and response. Through creating transparency of regulation and levelling standards, the Directive has undoubtedly contributed to sustaining the industry’s progressive initiatives.

More directly, the integration of environmental protection and mitigation into installation risk reports significantly reduces major accident risk in the Union. The integration of installation based emergency response plans with national contingency plans is a further major advance. One Member State (UK) has produced a new best practice for liability and financial responsibility in direct response to the Directive that may provoke more effective mechanisms elsewhere. Beyond preliminary reports on the overall implementation of the Directive, other Member States have yet to conduct surveys and assessments on the effectiveness of the intervention and how their workers perceive the situation.

The Directive has set a framework that allows Member States to establish national legislation in line with their specific requirements. Accordingly, the functioning of the internal market has been inhibited by wide-ranging interpretations of both technical goals (e.g. standards for installation risk reports) and processes. There is no evidence of insufficient measures in the Directive, however, national policy and cultural objectives contribute to differing implementations, as far as compatible with the Directive.

6.16.5Efficiency

Financial and practical efficiency gains for industry duty holders and regulators may also benefit social partners, particularly in developing a more consistent approach towards Member States’ implementation of the Directive.

Certain aspects of the cost-effectiveness of the intervention have been examined. The arrangements brought into effect by industry to acquire and maintain interoperable response equipment and expertise in accessible locations in EU waters, and to integrate those resources with national contingency plans, is a major efficiency gain as well as a highly effective step. It considerably increases the resources available to react in the event of a major accident, and limit the potential pollution from oil contamination.

The costs of introducing the formulation of risk assessment into the management systems, and the costs of demonstrating compliance to the regulator, are not unjustifiably excessive. So far, neither industry nor Member States have suggested the running costs of the intervention’s requirements are unjustified (see also in the annex, part VII). The cost of introducing a risk based control system that is installation-centred is a relatively small component of the estimated benefit for significantly reducing the annualised cost of a major accident in EU waters (the total cost for BP are estimated at $65 billion). This assumption is based on the available information from industry and competent authorities’ data.

Other factors are influencing efficiency. The south Mediterranean region (outside the EU) has experienced some of the world’s worst major accidents and blowouts. No region in the world has escaped the consequences of a major accident, and the southern EU Member States, as they enter offshore petroleum operations, are not exempt from the hazards. There is no data to make meaningful assessment of risk trends outside of the North Sea area, however the risk management approach of the intervention is demonstrably effective wherever it is deployed, globally. Feedback from Competent Authorities and duty holders outside the North Sea region is strongly in favour of the intervention. Industry however, has challenged some of the administrative cost burdens applied by some new entrant Competent Authorities.

Regarding proportionality, it appears that the cost burden on industry (including administrative costs paid to competent authorities) has been accepted as necessary in the North Sea region, where the historical major accident record has been particularly high. It remains unclear whether the same proportionality applies to the southern seas where the major accident record is reportedly light (relative to the number of installations). The value in the goal-setting nature of the Directive is that Member States are facilitated to develop their specific regimes on an individual, fit for purpose capacity basis. Crucially, the intervention also enables Member States to recover the associated costs of this development from the duty holders, whose activities create the major hazard risks the intervention aims to prevent.

Industry leading representatives, IADC (drillers) and IOGP (producers) continue their development of guidance and standards for best offshore practices in risk control. The intervention requirements for risk reporting and risk management encourage industry to improve, and are inherently economically efficient. These obligations help form the bridge between the stated aim of the industry and what actually happens on the installation.

Elements of the risk management systems required by the intervention identified by industry as causing unwarranted administrative burdens, are typically related to the functioning of the competent authority. In contrast, the competent authorities believe their systems to be cost efficient.

6.16.6EU-Added Value

The Directive’s measures have brought EU-added value to Member States by introducing improved offshore regulation and response from industry. Such a comprehensive overhaul of EU practices would not have occurred without the Directive.

According to the most consistently expressed views of Member States’ regulators, industry, NGO’s, and TU’s, the Directive has added value compared with Member States’ acting without EU intervention. The regulators and industry have taken positive views, whilst those of NGO’s and TU’s are more nuanced. Nevertheless, it can be said with some confidence that even the most advanced regimes have adopted measures that add value to their regulatory oversight that would not have occurred without the Directive coming into effect.

There are specific example of added value that can be attributed to the intervention. Firstly, amongst the new entrant risk-based regimes (outside the North Sea and Italy), both industry and competent authorities note new and better interfaces where there were previously few, or none. Secondly, the intervention established an EU expert group (EUOAG) based on a Commission decision 97 , thereby establishing the conditions for continuous improvement of Competent Authorities. Thirdly, the Directive created a consistent standard for all EU regulators. Fourthly, the EU-wide incident reporting system is the world’s first statutory international database. Finally, the integration of national contingency plans with industry arrangements, and the sharing of response resources, represent significant tools for mitigating the consequences of a major accident anywhere in EU waters. Moreover, the public consultation revealed that social stakeholders believe offshore petroleum operations in the EU would be less safe had the intervention not been made.

It is especially clear that those Member States that previously did not have risk based regimes would not have adopted such practices without EU intervention. But even the most advanced regimes have adopted measures that have added value to their region that would not, by direct admission, have occurred in the absence of the intervention.

7Conclusions

7.1Strengths and weaknesses

The decision by the Commission, as accepted by both the Council and Parliament, was to focus on the prevention and mitigation of major accidents based on risk management. Therefore the Directive overlooks measures that do not specifically address major accident prevention, most notably occupational safety and health, as well as day to day discharges and emissions. Furthermore, the intervention does not prescribe detailed arrangements to be followed, but instead establishes aims to be achieved. This approach has undoubtedly provided clarity of intent which has been reflected in the implementation.

Furthermore, the strategy of proliferating existing best practices rather than experimenting with unpractised solutions, has been very effective. As a consequence, for every measure there is an analogue already in place, usually in one or more Member States. Taking such an approach has assisted in rapidly upskilling new entrant Competent Authorities, as well as catalysing the comprehension of risk-based management practises for duty holders inexperienced in this area.

The nature of the intervention’s approach also has inherent limitations, namely diluting the degree of regulatory overlap across Member States by permitting discrepancies in implementation. This outcome is the result of the decision to opt for the creation of a Directive rather than a Regulation, as originally planned. Consequently, the benefits of standardisation, efficiency, benchmarking, and effectiveness through shared applications are less pronounced than initially intended.

A comprehensive vertical sector-based regime such as that introduced by the Directive requires significant supporting clarification and guidance. In particular, because the Directive sets goals to be attained rather than detailed steps to be followed. Duty holders and Member States have extensive discretion on how to implement and apply the Directive whilst remaining in compliance with its provisions. Some Member States prioritise the development of such material for themselves and their duty holders, whilst others do not. Under the loose parameters of this Directive, Member States are not strongly incentivised to follow the guidance published by other Member States.

Another associated limitation is that Member States are less likely to collaborate at their own cost to the production of EU-level guidance, despite the fact that guidance and model practise at the EU-level makes a very beneficial contribution to efficacy of the measures.

Since no disastrous accident has occurred in the EU since the Directive has come into effect, some themes analysed in the SWD lack a practical test.

7.2Areas to follow-up

With regard to liability, financial security and the handling of compensation claims, it is evident from this assessment that rules in Member States differ substantially. This is true for offshore installations, but also on an upper horizontal level regarding civil code. Owing to the avoidance of catastrophic accidents in recent years, it remains unknown how Member States’ national rules and regulation would work in practice.

According to the Directive, the decommissioning of installations is an inherent element of the installations’ life cycle. Powers to deal with this aspect have been delegated to Member States’ Competent Authorities, which request and assess a major hazard report before authorisation. These reports shall include provisions for the end of the installation’s lifetime, including environmental risks. As soon as decommissioning is envisaged, competent authorities shall assess an up-dated major hazard report.

The Directive does not include provisions going beyond the requirement to decommission in a safe manner, including environmental concerns. At the same time, it neither prescribes nor recommends certain processes or guides on when and how to dismantle an installation or the criteria for leaving an installation exceptionally “in situ”. Furthermore, the Directive does not address follow-up monitoring of the site and the sealed wells. The question remains whether the Directive requires an update to deal with these subjects.

On Mutual recognition between Member States of mobile drilling units regarding the authorisation process, Member States and stakeholders took completely different views on this matter. Member States insisted on the need to re-assess the major hazards of an installation, even if already assessed (e.g. by a neighbouring Member State). Conversely, industrial stakeholders called for the abandonment of this procedure, arguing that it creates an unnecessary administrative burden, which both delays operations and leads to substantial additional costs.

In an effort to resolve this issue, this practice of not recognizing the authorisation issued by a different Member State should be cross-referenced with existing legislation on the internal market.

7.3Overall assessment

The Commission carried out an in-depth assessment of the Directive’s application in practice. It was structured by bundling articles from the Directive into a number of overarching themes. These themes were drawn from stakeholder consultations, public consultation, the work of the Commission’s Inter-Service-Group, and a European Parliament report on liability.

The assessment examined how Member States implemented the Directive, reaching conclusions on the strengths, weaknesses, options, and challenges of this process. Overall, transposition was carried out to an adequate quality, nevertheless, the Commission follows-up certain weaknesses with Member States individually. Both in terms of implementation and practical application, there has been a comprehensive adoption of the Directive throughout the EU. here is firm evidence that the measures in the Directive, as implemented by Member States and responded to by industry, are relevant to ensuring best industry and regulatory practices for major accident prevention and mitigation, in the EU as well as globally. Best practise can subsequently contribute to the aim of mitigating unacceptably high risks of major accidents in EU waters.

The intervention of the Directive caused a comprehensive overhaul of EU offshore petroleum regulation, including all relevant jurisdictions and regions for major accident prevention. Furthermore, the Directive successfully ascribed primary duties to operators and owners for the prevention of major accidents on their installations, as well as the mitigation of the effects thereof. As such, the primary objective of the intervention was achieved.

The Directive has clearly established a hierarchy of control, including the license holder, operator and owner, in addition to the assignment of an independent expert regulator. These are the most critical and fundamental aims of the Directive because they form the foundation of risk control and major accident mitigation. Effective control and regulation are at the core of a wider, common objective to reduce the risk of major accidents to a level where they are unlikely to occur again in EU waters. Other key measures in the Directive address: means by which responsible actors are effective, mitigation measures in the event of a major accident, as well as the issue of raising overall standards throughout the Union and in third countries.

On the basis of available data, the cost of introducing the risk based system is a relatively small component of the estimated benefit of significantly reducing the annualised cost of a major accident in EU waters.

The Directive’s measures have brought EU-added value to all Member States through introducing more robust offshore regulation and a concomitant response from industry. Such a comprehensive overhaul of EU practices would not have occurred without the Directive.

Amongst the new risk-based regimes, industry has reported the development of constructive relationships with regulators, where previously there were none. The public consultation, though nuanced in its affirmation of the Directive in other areas, was decisively in support of the position that offshore petroleum operations in the EU would be less safe without the implementation of the Directive.

Environmental NGO’s call for stronger protection of the environment and stronger financial responsibility mechanisms, whilst broadly aligning themselves with the positive indicators from the implementation experience. Regulators and primary duty holders express that the new regulatory measures and subjective industry arrangements need to stabilise before any consideration can be given to further legal intervention. Further incident and information reports at the EU-level will indeed consolidate the baseline of EU performance indicators and identify critical trends in the major accident risk levels in the EU.

Regarding stakeholders that use the Directive in practice, both Member States’ Competent Authorities and operators/owners seem to be largely satisfied with the functioning of the Directive, as implemented by Member States. They feel that potential benefits (derived from avoided accidents) largely outweigh the costs of implementation and the adjustments required at the level of offshore installations.

The experience of implementing the Directive has been broadly positive, with the majority of measures successfully in place. Although further interventions at the EU-level are sometimes unwarranted, issues of concern or thematic indicators have been mapped across the Commission’s standard assessment questions. Where these grievances are found to have a reasonable foundation, they can broadly be handled at the administrative level. This kind of response is facilitated by increasing levels of maturity and stability across Member States’ regimes.

The preceding analysis illustrates a clearly positive trajectory of development within the industrial safety culture of the EU as a whole. This includes the establishment of regulators and duty holders who share clear, mutual objectives in a common pursuit of major accident prevention, including with regard to the environment.

Through the assessment process three key issues were particularly prevalent, they may therefore warrant a thorough follow up: (i) liability, financial security and the handling of compensation claims, (ii) the decommissioning of installations including questions on removal or leaving in situ, as well as the follow up after decommissioning (including the monitoring of sealed wells and (iii) the mutual recognition of mobile drilling installation in the EU.

8ANNEXES TO THE STAFF WORKING DOCUMENT (SWD)

9Annex I: Organisation and Timing

9.1Lead DG & DECIDE planning info

Lead DG: DG Energy

DECIDE PLAN

9.2Organization and Timing

9.3Evidence and Sources

The assessment was based on the following evidence and sources of information:

·Data collected from Stakeholders

·Data collected from Member States

·Information exchanged during stakeholder consultation meetings and workshops

·Information gathered from the public consultation process

·Information exchanged during the proceedings of the EU Offshore Authorities Group

·Information collected from experts in the sector

·Various relevant reports and legislation.

9.4Discussions in the Commission's Inter Service Group

DG ENER has set up an Inter Service Group with representatives from various relevant DGs specifically for the purposes of the assessment of the OSD, which was consulted on a regular basis. The DGs participating in this group were: CLIMA, COMP, ENV, FISMA, GROW, HOME, JRC, JUST, MARE, NEAR, MOVE, SG, SJ and EMPL. On its meeting on the 31st of January 2019, the ISG has discussed the results of the stakeholder and public consultations. In addition, bilateral meetings were held with several DGs for more technical follow-up. During its meeting on 25th of October 2019 the ISG has further refined the assessment SWD and its Annexes.

10Annex II: Stakeholder Consultation

10.1Consultation scope and objectives

In assessing the effectiveness of the Offshore Safety Directive with regard to its objectives, for example the implementation of adequate levels of safety and environmental protection across the EU, the review aims to verify whether:

·the main objectives of the Directive have been achieved and if not, whether an amendment of the Directive or other legislation is appropriate.

·any gaps in legislation exist which need to be covered for improving the level of safety and environmental protection in offshore oil and gas operations.

·certain provisions of the Directive impose undue burden on Member States or the industry and whether their removal should be considered.

·the Directive has adequately harmonised the regulatory structure and level of safety and environmental protection across the EU offshore operations, proportionately to the activity levels of the Member States.

·the Directive is effective and proportionate with regard to the objectives set.

The European Commission involved in this task several Directorates-General with DG Energy in the lead. These Directorates-General co-operate in the framework of a formal Inter-Service-Group to gather and analyse information for addressing the review and report. The Directorate-General for Energy informed the members of the EUOAG (Competent Authorities of Member States, associations and unions) on its intention to evaluate and review the Directive, in September 2017.

The consultation process has opened the discussion on all relevant topics, including (non-exhaustive list):

·Liability, compensation claims, financial security and criminal law – also with regard to Resolution 2015/2352(INI) of December 1st 2016 of the European Parliament on liability, compensation and financial security for offshore oil and gas operations:

·Decommissioning and abandonment of installations and wells;

·External threats (e.g. cyber security; sabotage, terrorist and criminal attacks, hybrid attacks);

·Independent verification;

·Mutual recognition of Mobile Offshore Drilling Units in Member States' jurisdictions;

·Inconsistencies, shortcomings or unclear wording of the Offshore Safety Directive.

Participants of the consultation are expected to provide their opinion, experience and proposals preferentially supported by facts and figures.

10.2Mapping and participation of stakeholders

Article 4(1) of the European Commission Decision of 2012 concerning the functioning of the EU Offshore Authorities Group (EUOAG) designates the Member States’ Competent Authorities responsible for the regulatory oversight of offshore oil and gas activities and related policy issues as the members of the Group.

In a first step, the Commission has consulted these competent authorities to get feedback on their technical and regulatory experience of implementing the Directive.

Secondly, the Commission has consulted stakeholders represented in the EUOAG’s plenary meetings. These were the European Community Shipowners' Association, the International Association of Drilling Contractors, the International Marine Contractors Association, the International Association of Oil and Gas Producers and the IndustriAll trade union.

Thirdly, the Commission has contacted regional groups and conventions. These were the OSPAR Convention, the Barcelona Convention, REMPEC, the Commission on the Protection of the Black Sea against Pollution, the International Maritime Organization and the International Labour Organization.

Fourthly, further consultation of an enlarged circle of stakeholders and Non-Governmental Organizations took place from international, European and national level. Stakeholders were asked to provide the Commission with the information necessary for an in-depth assessment of the Directive’s effectiveness, as well as their opinion on related matters. Numerous organizations were contacted and response / involvement was received by Sea Shepherd Global, the Bellona Foundation, World Wildlife Fund, the Nature Conservancy and Surfrider Foundation Europe.

Finally, all other interested parties, e.g. private, business, public entities, have provided views and comments via a public consultation carried out by the European Commission.

10.3Selection of consultation activities and their accessibility

The Commission has carried out the following consultation activities:

February-March 2018: Contributions from external experts with specific expertise in safety legislation, including health and safety at work and protection of the environment;

March 2018: Start of consultation with the experts and key stakeholders through the EU Offshore Oil and Gas Authorities Group;

September 2018: Stakeholders’ Workshop organised by the Commission in Brussels. The Commission invited participants from organized European groups relevant to the offshore sector. Range and extent of participants invited took into account contributions and interest expressed during the public consultation.

September - December 2018: 12-week long public consultation 99 ;

January 2019: Additional Stakeholder's Workshop

10.4Summary /overview on consultation activities by stakeholder groups and indicative timing

Table 1: Overview of consultation activities

10.5Consultation webpage & communication activities 

   The Commission has published the roadmap document on the consultation webpage specifically created for this assessment. Announcements at the webpage of the Directorate-General for Energy have further informed the public on this review and provided the link to the webpage for the public consultation.

10.5.1Roadmap of the Evaluation

The Roadmap document, published in plain language, explains the context of the Directive and its assessment. It clearly sets out the purpose, scope and methodology of the assessment process. Full text of roadmap attached as pdf document.

10.5.2Questionnaire for public consultation

Text of questionnaire is separately attached as pdf document.

10.5.3Position Statements received from Stakeholders 

Official statements were received by the following organizations:

-Irish Offshore Operators' Association

-European Community Shipowners' Association, International Association of Drilling Contractors and International Marine Contractors Association (joint statement)

-LUKOIL

-International Association of Oil and Gas Producers

-The Bellona Foundation, World Wildlife Fund, Friends of the Earth Europe, Surfrider Foundation Europe, Young Friends of the Earth Norway (joint statement)

-World Wildlife Fund Greece

10.6Synopsis of Consultation Activities

10.6.1February-March 2018: 

Contributions from external experts with specific expertise pursuant to the scope of the OSD

The first step of the consultation strategy aimed at collecting information to consolidate the Commission’s knowledge-base on the evolution of offshore safety systems since the entry into force of the OSD.

The consultation involved independent national experts, representatives from EU countries and groups from the offshore industry affected by the OSD. Other General Directions of the Commission (e.g. DG ENV and JUST) were also consulted.

Five topics previously identified as “specific areas for an in-depth assessment” were addressed through a questionnaire previously sent to participants:

-    Liability, compensation claims, financial security instruments and criminal prosecution

-    Decommissioning of offshore installations and abandoning of wells

-    External Threats and Cyber Security

-    Independent Verification

-    Mutual recognition of Mobile Offshore Drilling Units in MS jurisdictions

The result of the first step led to the drafting of an “issue paper”, which was presented to the EU Offshore Authorities Group (EUAOG) ahead of the meeting of 21 March 2018.

10.6.2March 2018: 

Consultation with external experts and key stakeholders through the EU Offshore Authorities Group

Article 4(1) of the European Commission Decision of 2012 concerning the functioning of the EU Offshore Authorities Group (EUOAG) designates the Member States’ Competent Authorities responsible for the regulatory oversight of offshore oil and gas activities and related policy issues as the members of the Group.

In a second step, the Commission consulted these competent authorities to get feedback on their technical and regulatory experience of implementing the OSD. This approach went on throughout the whole assessment process along succeeding EUOAG meetings from September 2017 to January 2019.

Members of the EUOAG’s plenary and ordinary sessions had been already informed of the procedures and time line of the assessment process at their previous meeting of September 2017. The discussion also recalled the Resolution of the European Parliament of 1 December 2016 on liability, compensation and financial security for offshore oil and gas operations which calls the Commission to take new initiatives in this field.

Most of the agenda of the ordinary session of the EUOAG meeting of 21 March 2018 was dedicated to the consultation of the EUOAG on the review and assessment of the Offshore Safety Directive. The consultation aimed at identifying best practices in selected areas and collect regulators’ views. The Commission announced the upcoming public consultation and future workshops back-to-back with the 16th EUOAG.

The following technical issues were discussed both in ordinary and plenary settings of the EUOAG:

-    EU cross-sector legislation for environmental liability;

-    Liability, financial security and handling of compensation claims;

-    National and international rules applicable for decommissioning;

-    Cyber Security: specific threats for industrial installations (other sectors);

-    Experiences with the mutual recognition of platforms while crossing borders.

10.6.303 May 2018 to 31 May 2018: 

Feedback period on the consultation roadmap

Following the publication of the consultation roadmap, the broader public had the chance to give comments. Four contributions were received from business associations and one from the Polish national oil and gas company PGiNG. All comments are publically available on the consultation webpage.

None of the received comments let to identify new areas for an in-depth assessment. Therefore, there has been no change in the Commission’s approach in evaluating the OSD at this stage, or in the drafting of the questionnaire for public consultation.

10.6.419 September and 4-5 December 2018: 

Stakeholder consultation meeting in Brussels, completed by face to face interviews with targeted stakeholders

The primary purpose of the workshop held on 19 September 2019 was to launch the project to the broad base of stakeholders and add to the consultation which took place between the Commission and the primary duty holders (regulators and industry). This resulted in further broadening the interest to the European community, namely the NGOs. At the workshop, the Commission announced the launch of the public consultation and encouraged delegates to participate in it.

A total of 82 delegates have participated in the event. Participation from regulators and industry was considerably larger in comparison to that of non-governmental organisations (3 NGO’s, one phone-in and trades unions (2). Despite the Commission’s efforts, it was not possible to attract representatives of the marine economy or coastal communities to the event.

The duty holders were balanced by social partners, speakers from NGOs and trade union sectors, whom reflected on the extent to which the Directive had met the ambitions of the environmental activists and offshore workers. The final item was an introduction to the liabilities and financial indemnities subject from subject matter experts, joined with commentary from NGO’s and academia.

Prior to the workshop, the Commission had identified 15 elements of particular interest that were notified to speakers to guide their preparations for the workshop. The workshop itself prompted discussions around twelve major topics, five of which were not amongst the elements previously identified by the Commission.

The workshop’s discussion broadly showed the value of the OSD among groups affected by it. However, many of them pointed out a fragmented implementation of the Directive by Regulators. Regulators pointed to slow reaction of some duty holders in taking the necessary steps to implement the OSD requirements, especially operators active in the southern maritime regions. All stakeholders pointed to a lack of maturity in the implementation of the OSD. Except for the operators and NGOs, the audience showed a generally low level of understanding of the topic “financial responsibility”. The commission’s services also note a general low strategic positioning of trade-unions in the discussion.

In order to complete the input received form stakeholders and in anticipation of the next workshops of January 2019, four face to face interviews between targeted stakeholders with both the industry and the civil society were conducted on 4 and 5 December 2018 by the independent expert supporting the Commission’s services in the assessment of the OSD. The interviews involved respectively the International Marine Contractors’ Association (IMCA), the European Community Shipowners’ Associations (ECSA) and the International Association of Drilling Contractors (IADC), the Bellona foundation, the international organization of oil and gas producers (IOGP) and finally the Offshore Pollution Liability Association (OPOL) and other insurers also supported by IOGP. These interview help to better clarify each duty-holder’s positioning vis-à-vis the OSD’s implementation.

10.6.519 September to 21 December 2018: public consultation

The public consultation took place from 19 September to 21 December 2018. The questionnaire comprised 102 questions, broken down into 17 chapters. Fifty-one replies were submitted to the survey portal. Additionally, eleven open letters from National authorities, business associations and oil and gas companies. About 60% of the contributions were public. Out of the 51 answers received, 16 were submitted by entities registered in the transparency register. Only few national regulators used the public consultation to provide their feedbacks on the implementation of the OSD. It is noteworthy that 200 draft replies to the questionnaire remained after closure of the consultation period. No technical issue was reported nor could be identified subsequently that could explain this rate. While business and business associations authored one-third of all contributions, individual citizens constitute the biggest single contributor group.

Regarding the effectiveness of the Directive in reaching its objective to reduce risks of major accidents on offshore installations, the assessment shows an overall satisfaction across all contributor groups, except for civil society organisations who showed a mitigated view of the topic. Yet, one third of all contributors believe that the Directives’ provisions needs to be adjusted. Businesses and business associations disapprove this statement largely. The majority of contributors believe that EU countries’ transposition of the OSD should be improved.

The detailed assessment of the fulfilment of the OSD’s specific objectives reflects the overall satisfaction across all contributor groups. Nevertheless, all contributors agree, also within each group, that the application of the OSD is not consistent across all EU Member States.

The general assessment of the results of the public consultation confirms the relevance of the OSD. However, the businesses and business associations overly believe that some provisions of the OSD can be simplified without compromising their objectives. The contributors believe that the safety environment of offshore oil and gas operations would be worst, would the OSD not have been adopted.

Comments to the general section pointed out that the review is happening too soon. The general view of the industry is that no changes or additions should be made to the OSD’s scope and content. Finally, a recurrent shortcoming of the OSD according to the industry is the lack of mutual and automatic recognition of safety cases between EU member states that leads to increased difficulties and costs when moving rigs between countries.

NGOs called for the OSD to be made fully consistent with the EU oceans and climate policies, targets and objectives also with regards to the impacts of offshore drilling and oil spills on the marine ecosystems.

The public consultation confirmed the offshore industry’s position on liability, financial security, financial instruments and the handling of compensation claims. The clear and suitable assignment of responsibilities of risk management between licensees, operators, owners and third party contractors is also confirmed.

It is noteworthy that individual contributors do not consider that public participation in strategic decisions concerning the effects of oil and gas operations is assured and adequate and effective. This is mostly attributed to the practical application or enforcement of the overall legal framework.

The offshore safety duty-holders strongly believe that the information requested in annex IX OSD is sufficient to portray the safety performance levels of oil and gas. However, international organisation and civil society organisation doubt that the operators and owners provide to the competent authorities the requested information correctly and in a manner that reflects reality or that the interested public has easy access to it.

On the topic of internal and external emergency plans, individuals and civil society would like measures to be carried out by the Member States instead of the operators and owners. The consultation shows a certain degree of uncertainty of contributors regarding the adequacy of external emergency plans in successfully dealing with transboundary effects. Finally, civil society contributors voiced concerns for inadequate transparency towards the public concerning emergency incidents. In addition, individual contributors doubt that financial penalties are really applied or even an effective, proportionate and dissuasive tools for preventing violation of the OSD standards.

No clear patterns emerged from the question whether the application of criminal law to gross breaches of duty leading to a major accident, or a near-miss, or a major environmental incident, consistently and across the EU, would enhance the performance of industry in risk management and reduction.

A vast majority of contributors agree that the OSD provisions are adequate for major accident prevention and environmental protection during the decommissioning process and for providing long term environmental protection after decommissioning. Yet, many responses (businesses, civil society and individuals) support the need for additional provisions and/or financial schemes for post decommissioning environmental protection and liability and call for additional technical guidelines for decommissioning and plugging and abandonment. IOGP submitted a statement on the subject with arguments in favour of the current regulatory setup, which they see as adequate.

One third of all contributors consider that additional, sector-specific measures are necessary to adequately protect offshore oil and gas installations from external threats, sabotage and cyber security threats. The business sector disagrees with this statement.

Businesses and their associations do not consider that there is adequate mutual recognition of Mobile Offshore Drilling Units across borders between Member States, without undue restrictions and undue administrative burden. Some propose to regulate mutual recognition at EU level (via a regulation), other argue that bilateral consultation at national level can solve the issue.

Finally, throughout the replies to the public consultation, the offshore industry challenged the meaningfulness of the Corporate Major Accident Prevention Policy (CMAPP), while at the same time, individual contributors called for safety cases to be made part of the public domain. It must be noted that on some questions related to specific articles of the OSD and on specific areas of the review, business associations representing different level of the offshore industry life chain submitted coordinated replies, or referred to the contribution of the IOGP.

Preliminary results of the public consultation were presented to the stakeholders in the EUOAG ordinary and plenary meetings on 16 and 17 January 2019 and were positively received. The Commission’s services explained that the results do not prejudge any outcomes of the assessment regarding a potential revision of the OSD, but were going to be used to strengthen the knowledge base.

10.6.616 and 17 January 2019: 

Two additional workshops with regulators and stakeholders in Brussels.

An additional round of consultation with stakeholder (not announced in the consultation roadmap) took place in the form of two workshops on the side-line of the ordinary and plenary meetings of the EUOAG in Brussels on 16 and 17 January 2019. The first workshop was opened only for national regulators; the latter was addressing all stakeholders.

They served the purpose to stabilise the confidence in the Commission’s assessment work, keep on building the community of purpose between all groups impacted by the OSD, re-visit key underlying risk drivers of the Directive and intensify the discussion around key areas for an in-depth assessment. Additionally, the workshop served to secure the stakeholders support in accessing key data for the assessment.

The two workshops were considered successful. No new theme emerged from the discussion. The fault lines between stakeholders emerged more precisely along the discussions on the outcomes of the public consultation and the thematic indicators of the assessment.

Replies to the Commission’s request for data arrived in March and April 2019, and allowed the Commission’s service to strengthen and refine its assessments on key aspects of the OSD’s assessment.

10.7Stakeholder positions

Throughout the consultation process, various arguments were expressed. On certain subjects, there were clear, distinct positions amongst the various stakeholder groups with regard to the themes and subjects analysed in the discussions. The text below gives a synopsis were such convergence was evident.

On the subject of decommissioning, the industry has strongly advocated that all decommissioning activities, including the plugging and abandonment of wells, take place according to safety and environmental legislation and that wells are fully sealed at the end of operations. Some MS have supported the above, adding that the industry is liable to perpetuity for any need of intervention. Other MS however, expressed doubt about the sealing of wells. NGOs have expressed concern about certain derogations granted to decommissioning projects, which involve leaving in place amounts of oil or harmful substances.

With regard to the mutual recognition of mobile drilling units, the industry has made a strong plea for harmonizing the assessment of the RoMH and other documentation within EU MS, in order to simplify and expedite the process of transferring the units between various jurisdictions. However, MS have strongly opposed such approach, which they consider both risky in terms of the responsibility of the competent authorities, as well as unnecessary due to the low occurrence of such transfers entailing 'first entry' of a unit. According to MS views, the assessment of safety documentation is adequately fast.

On matters involving financial liability and the capacity to cover any environmental or property damage caused by potential accidents, there was a clear discrepancy between the views of MS and industry on the one hand and NGOs on the other. The first consider that the systems in place are adequate to cover any potential damages caused, while the latter express serious doubts.

Overall, both MS and industry consider that the Directive is fit for purpose. In some occasions, the public has expressed concern about important small incidents and leakages not being reported, as well as the effectiveness of the internal, external and transboundary emergency response systems in place.

11 Annex III: Member States’ implementation of the Directive

The assessment conducted by the Commission has shown that the overall level of the transposition of the Directive in the Member States is adequate, although the integrity and quality of implementation across the Member States varies significantly. Member States presented different approaches for the implementation of the Directive (either in full or in relation to specific provisions). Some Member States have adopted new legislation that transposes the provisions of the Directive, whereas others have amended existing legislation and included the transposition of the Directive’s different provisions into several pieces of legislation.

Certain Member States have largely literally included the provisions of the Directive in their national law, while others have partly or fully adapted the wording of the Directive with the intention to convert it better into their specific legislative culture. The assessment puts the focus on the most important provisions of the Directive, having the largest impact on offshore safety. It follows a summary from the assessment of the quality of Member States’ implementation:

·The overall implementation of Article 3 of the Directive, containing general principles of risk management in offshore oil and gas operations and describing fundamental scope of responsibility of operators under the Directive, is considered satisfactory. It should be noted however that several Member States had difficulties with the transposition of its second paragraph, dealing with the exclusion or limitation of the operator’s duties.

·Article 4 of the Directive deals with safety and environmental considerations relating to licences. It underlines the Directive’s objective to ensure the protection of the environment by avoiding offshore accidents. Some Member States had difficulties appropriately implementing the Article’s second, third, and fifth paragraphs. These paragraphs respectively include: criteria for the assessment of technical and financial capability of an applicant, licensee's liabilities, and the availability and assessment of information collected as a result of exploration. The transposition assessment conducted by the Commission, followed-up by an individual dialogue with Member States, has also shown room for improvement in respect of the fourth paragraph. This paragraph relates to the appointment of an operator by a licensee or the licensing authority (e.g. rules of procedure for co-operation between licensing authority and competent authority).

·Article 5 of the Directive covers fundamental rules for public participation on the issue of environmental impacts associated with planned offshore oil and gas exploration. The implementation of the first paragraph (no drilling without public participation) is considered satisfactory. However, Member States did not always fully implement applicable rules for when public participation is not undertaken, covered in paragraph 2.

·The Commission has identified a good level of implementation for Article 6 of the Offshore Safety Directive, setting out rules applicable to offshore oil and gas operations within licensed areas. However, transposition of its sixth and eighth paragraphs has proven challenging for some Member States. Paragraph 6 covers the obligation to submit a notification of well operations or a notification of combined operation. Paragraph 8 covers the obligation to undertake tripartite consultation between the competent authority, operators and owners, and workers’ representatives in the formulation of standards and policies dealing with major accident prevention. It should also be noted that the definitions provided in Article 2, points 21 Directive ('connected infrastructure') and 22 Directive ('acceptance') of the Directive, referred to in the Article in question, have not been correctly and completely implemented by several Member States.

·Article 7 of the Directive, concerning the licensee’s potential liability for environmental damages, has been completely and correctly transposed by almost all Member States.

·Article 8 of the Directive concerns the appointment of a national competent authority. Implementation of its second and fourth paragraphs has posed difficulties for many Member States. These paragraphs refer to rules relating to the design of the competent authority, as well as public availability of the information on the organisation of the competent authority, respectively. Some Member States have also experienced problems with the transposition of the first and fifth paragraphs. These paragraphs address regulatory functions of the competent authorities, and the provision of adequate human and financial resources to competent authorities, respectively.

·For Article 9 of the Directive, which sets out rules for functioning of the competent authority, the Commission services are in contact with several Member States to obtain additional information.

·The vast majority of Member States have also completely and correctly transposed Article 12 of the Directive, setting out detailed rules for the submission of the report on major hazards related to production installations. It should be noted, however, that implementation of the definition of 'major hazard', referred to in Article 12 of the Directive, has proven challenging for some Member States.

·A good level of implementation of Article 13 of the Directive was identified, setting out detailed rules for the submission of the report on major hazards for the non-production installations.

·Article 14 of the Directive deals in its entirety with internal emergency response plans. It has been adequately implemented by the Member States.

·Implementation of Article 17 of the Directive was overall successful, setting out requirements for schemes for independent verification prepared by operators and owners. However, transposition of its second paragraph has posed certain challenges for some Member States. This paragraph states that the results of the independent verification should be without prejudice to the responsibility of the operator (or the owner) for the correct and safe functioning of the equipment and systems under verification. A few Member States also experienced problems with the implementation of the definition of 'independent verification', referred to, inter alia, in Article 17 of the Directive.

·Article 18 of the Directive sets out powers of the competent authority regarding operations on installations. The national transposition measures of a number of Member States require improvement (e.g. independence of the authority, unclear mandate, or rules of procedure).

·Article 19 of the Directive, setting out detailed rules for major accident prevention by operators and owners, has been correctly and completely implemented by Member States. However, the fourth paragraph (concerning tripartite consultation) and seventh paragraph (dealing with the obligation to prepare and revise standards and guidance on best practice in relation to the control of major hazards) have proven challenging for several Member States.

·Article 20 of the Directive concerns the offshore oil and gas operations conducted outside the Union, and should have been transposed by all Member States. This includes landlocked Member States and Member States with offshore waters that do not have offshore oil and gas operations under their jurisdiction and that do not plan to licence such operations. Implementation of its first paragraph, obliging companies to report the circumstances of any major accident they have been involved in globally to the Member State where they are registered, requires further improvement by a significant number of Member States. Particularly regarding the empowerment of the competent authority to request adequate documentation and enforce its submission.

·Almost all Member States have fully and correctly transposed Article 22 of the Directive, providing the foundations for confidential reporting of safety concerns. Nevertheless, improvements to the national transposition measures notified by a few Member States are still necessary.

·Article 23 of the Directive concerns the obligation to share information between owners, operators, and competent authorities, Article 24 deals with transparency, Article 25 relates to reporting on safety and environmental impact, and Article 26 sets out rules for investigation following a major accident. All of these Articles have been overall well implemented by the Member States.

·The overall level of implementation of Article 27 of the Directive, setting out rules for cooperation between Member States, is also highly satisfactory. Only its final (fifth) paragraph has posed some difficulties for several Member States. It should also be noted that implementation of the definition of 'industry' provided for by Article 2(35) of the Directive, and referred to in many provisions thereof (including Article 27), has proven challenging for some Member States.

·Article 28 of the Directive, providing the requirements for internal emergency response plans, has been correctly and completely implemented by the vast majority of Member States.

·The overall level of implementation of Article 29 of the Directive, concerning external emergency response plans and emergency preparedness, is satisfactory. However, there are still some weaknesses in national transposition measures in a few Member States.

·Article 30 of the Directive deals with emergency response, and has been completely and correctly transposed by almost all Member States. Only the Article’s final (third) paragraph, obliging Member States to collect the information necessary for thorough investigation, has proven problematic for some Member States.

·The large majority of Member States have adequately transposed Article 31 of the Directive, concerning the transboundary emergency preparedness and response of Member States with offshore oil and gas operations under their jurisdiction. In several Member States there are weaknesses regarding the second, fourth, and sixth paragraphs. These respectively include: major hazards in internal and external emergency response plans, coordination of measures outside of the EU, and information obligations.

·Article 34 of the Directive obliges Member States to specify rules on effective, proportionate, and dissuasive penalties applicable to infringements of national provisions and to ensure that such penalties are enforced. Further analysis is required to assess whether the rules enforced by Member States are effective, proportional and dissuasive.

The dialogue with Member States is being continued to achieve improvements and a fully adequate level of implementation. If necessary the Commission may start infringement proceedings in case of severe shortcomings. Following the Commission’s analysis of safety performance as published in the annual reports, offshore safety performance appears adequate in all Member States.

12Annex IV: Methodology for the assessment

12.1Consolidated list of 15 thematic indicators undergoing analysis

Table 2: Thematic Indicators

12.2Matrix for the detailed assessment

Actions required of the commission pursuant to the directive 

(To include recommendations as appropriate)

·Action 1 (Article 40): To assess the experience of implementing the directive;

·Action 2 (Article 39(3) (Within the scope of Directive 2008/99/EC)): To assess the appropriateness of applying criminal law to certain breaches of environmental duty; and

·Action 3 (Article 39(1)(2) & EP Resolution 2015/2352(INI)): To report on the status of liabilities for damages and compensation mechanisms

Primary objectives of the directive by which actions are to be evaluated 

(Being the principal objectives underpinning the directive)

·Objective 1: That the significant and unacceptably high risks of a major accident in EU waters be lowered. The sub-objectives being to attain global best industry practices in the EU; and to implement global best regulatory practices for major accident prevention and mitigation.

·Objective 2: That the insufficient arrangements for responding to a major accident in EU waters be improved. The sub-objective being to implement fully joined-up emergency preparedness and response in all EU offshore regions.

·Objective 3: That the arrangements for discharging financial liabilities and civil compensation for economic loss be more consistently effective in the EU (Subsequently updated by the European Parliament in 2015). The sub-objective being to improve and clarify existing EU liability and compensation provisions.

12.2.1Structure of the assessment matrix

Action 1 to capture Objectives 1 and 2

Pursuant to Article 40, the Commission will evaluate whether and to what extent the experience of implementing the directive by MS’ has:

(i)    lowered the risks of a major accident in EU waters (and the degree of significance and level of residual risk)

(ii)    improved the arrangements for responding to a major accident in EU waters (and the degree of sufficiency attained)

Action 2 (stand-alone)

Pursuant to Article 39(3) and within the scope of Directive 2008/99/EC - The Environmental Crime Directive - to assess the appropriateness of applying criminal law to certain breaches of environmental duty

Action 3 to capture Objective 3

Pursuant to Article 39(1) & (2) and Parliament resolution of 1 December 2016 - on liability, compensation and financial security for offshore oil and gas operations (2015/2352(INI)) – to report on the status of MS’ with regard to the consistency and effectiveness of schemes for financial liability and compensation for economic loss

Brief summary of how assessment guidelines are to be applied to the assessment matrix.

The assessment aims to consider progress in relation to how things were expected to happen i.e. referring to the intervention logic behind the directive, and changes against the assessment baseline, and other relevant points of comparison. The criteria conventionally adopted by the Commission are: relevance; coherence; effectiveness; efficiency; and EU-added value.

The assessment also describes the extent to which the practical aims of the Offshore Directive 2013/30/EU have been attained at a substantial factor. The Directive was intended to introduce a substantially complete physical system of primary measures for MS’ regulators and petroleum license holders and installation owners and operators and an assessment of whether the practical aims of the measures are physically in effect, i.e. attained, is required before the assessments of efficiency, coherence achieved by such measures are made.

The assessment will also attempt to explore the potential for simplification and burden reduction as an implicit factor.

Assessment criteria

Relevance: looks at the relationship between the needs and problems relating to the targeted societal segment, namely the maritime and coastal users and the environment where the offshore petroleum activities occur, and the objective of the intervention.

Coherence: is a factor of the external coherence with other EU legislation and policy and where relevant, at the Member State or International level. It also is an indicator of how different components of the directive, as implemented, operate together to achieve particular objectives.

Effectiveness: considers how successful the directive may have been in achieving or progressing towards its objectives. Where objectives may not have been achieved, the assessment will attempt to assess the extent to which progress falls short and attempt to explain the shortfall.

Efficiency: meant as the relationship between the resources required to execute a measure and the gain attained (i.e. an assessment of costs and benefits). The cost-benefit analysis will be quantified where possible and identify reductions or increases in regulatory burdens (Where useful, potential (future) savings identified from the assessment findings will be estimated)

EU-added value: a deduction of the relative efficacy between the implementation of the directive, and the Member States acting alone in regulating the offshore sector’s control of major accident risk.

Note on the hierarchy of the assessment factors: Relevance and coherence were intensively processed in the impact assessment accompanying the draft directive (originally a draft regulation) and the assessment of these factors in the assessment has therefore, a substantial focus on validation of the original design intent. Conversely, the efficiency and effectiveness factors are the key determinants of the extent and degree of attainment of the directive’s objectives, namely, reducing the risk of a major accident occurring, and mitigating the impact should a major accident nonetheless occur. EU-added value will be a deduction based upon some permutation of the efficacy factors processed in the assessment.

Table 4: Assessment Matrix

Colour key:

Full heading

Abbreviated heading