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Safety of offshore oil and gas exploration and production activities

By 19 July 2015, EU member states will be required to have put in place laws, regulations and administrative provisions to implement the EU Directive on safety of offshore oil and gas operations 2013/30/EU (the OSD). In the UK this will be achieved primarily through the Offshore Installations (Offshore Safety Directive) (Safety Case etc) Regulations 2015 (the SCR), as well as some further regulations to be introduced by the Department of Energy and Climate Change (DECC) and the Department for Environment, Food and Rural Affairs (DEFRA).

Following the Deepwater Horizon disaster in 2010, the OSD was introduced to address inconsistencies in the regulation of offshore oil and gas activities between EU member states. The OSD is intended to create a complex but comprehensive and coherent regulatory environment among coastal member states to optimise the whole lifecycle of both the safety and environmental aspects of offshore oil and gas activities. Further details are set out in our previous briefing, The new EU Directive on safety of offshore oil and gas exploration and production activities.

In the UK, many of the OSD's provisions are already satisfied by the existing regulatory framework. Implementing measures will nonetheless make some changes to the existing legislation. Key considerations for affected parties in the UK are discussed below, together with some perspectives on how the new framework is being implemented by other EU member states. The number of current offshore installations in the UK are much higher than in other member states, so the immediate impact of the OSD will vary across the EU.

The objectives of the OSD are as follows:

  • To reduce the occurrence of major accidents relating to offshore oil and gas operations, limit their consequences and strengthen the EU's preparedness and response capacity to deal with a major accident;
  • To cover the whole lifecycle of offshore activities, from design and planning through commissioning and operation to the final removal of an oil or gas installation;
  • To achieve a consistent minimum of safety and environmental standards. Where adequate measures already exist in a national regime, the OSD should not materially alter these; and
  • To improve and clarify existing EU liability and compensation provisions for damage caused by offshore oil and gas activities.

Timeline for implementation and compliance

  • Member state implementing measures must be in force by 19 July 2015;
  • Owners/operators of installations coming into existence after 18 July 2013 must comply by the date of their next thorough review or 19 July 2016, whichever is sooner;
  • Owners/operators of production installations coming into existence after 19 July 2016, and owners of non-production installations without a UK safety case and working in UK waters for the first time after 19 July 2016, must comply with new regulations by 19 July 2016; and
  • Operators of existing offshore installations must comply with the new legislation by the next scheduled regulatory review of their risk assessment documentation or 19 July 2018

The UK's existing offshore oil and gas regulatory regime was introduced as a result of the Piper Alpha disaster in 1988. Regulation by North Sea member states was already regarded as broadly fit for purpose, and generally considered to be world class. For these reasons, the European Commission used the North Sea regimes as a template for a number of the OSD proposals. During negotiations, UK stakeholders argued successfully for the implementation of regulatory reform using a Directive rather than a directly applicable Regulation in order to avoid a costly and complicated overhaul of the existing UK regulatory framework. The OSD allows much of the UK's existing regime to remain in place, thus reducing the administrative burden on the oil and gas industry.

The Health and Safety Executive (HSE), DECC and DEFRA have been responsible for transposing the OSD into the existing UK offshore safety and environmental regime. Most changes will be brought about by the SCR, which will implement obligations relating to health and safety, and some environmental provisions. The Merchant Shipping (Oil Pollution Preparedness, Response and Co-operation Convention) (Amendment) Regulations 2015 will implement environmental provisions relating to internal emergency response plans; the Offshore Petroleum Licensing (Offshore Safety Directive) Regulations 2015 will implement provisions relating to the grant and transfer of licences; and the Environmental Damage (Prevention and Remediation) (England) Regulations 2015 will implement changes to environmental liability provisions. All implementing measures will only amend existing legislation as it applies to external waters, so the old framework will continue to apply to internal waters. The main changes for UK owners/operators will include:

  • Creation of an independent offshore 'competent authority':
    DECC and HSE have established the Offshore Safety Directive Regulator (OSDR), an independent national authority who will be responsible for regulatory oversight. The OSDR will be required to verify provisions for safety, environmental operations and emergency preparedness of rigs and platforms. It will also be responsible for enforcement action and the imposition of penalties for contravention of the new regime.
  • Introduction of board level responsibility:
    Operators/owners will be required to submit a 'corporate major accident prevention policy'. This will provide a high level overview of the safety and environmental management systems in place, and of organisational arrangements for the control of major hazards. Board members will be given a formal responsibility to ensure that corporate safety and environmental policy is suitable and properly implemented and maintained. The requirement to maintain a corporate major accident prevention policy is a new obligation for operators/owners.
  • Introduction of more stringent licencing conditions:
    The licensing authority will be required to take into account a greater range of considerations before granting or transferring a licence to explore for or produce petroleum, and to make sure that only operators with proven technical and financial capabilities to ensure the safety of offshore activities and environmental protection are granted licences. In order to be granted a license the applicant will need to demonstrate that adequate provision has been made or will be made to cover liabilities arising from its offshore oil and gas activities.
  • New provisions on who bears liability for environmental damage:
    Competent authorities will be able to look to licensees and/or operators to fund any requirements under the EU Environmental Liability Directive to prevent and/or remedy environmental damage. The geographical scope of liability will extend beyond coastal waters to cover all marine waters under the jurisdiction of member states.
  • Integration of the management of safety and environmental risks:
    The SCR have been extended to cover management and control of environmental major accident hazards. Corporate major accident prevention policies, safety and environmental management systems, verification schemes and internal emergency response arrangements will need to address environmental protection issues. Environmental assessments, management and emergency response arrangements will need to be summarised within the safety case as well as associated notifications.
  • Introduction of independent verification for environmental critical elements:
    The existing scheme for independent verification of safety critical elements will be extended to cover 'safety and environmental critical elements' throughout the life cycle of installations, as defined by the OSD. This is to ensure that satisfactory environmental and safety standards are being adhered to at all times, and will provide evidence of operators' compliance with their legal obligations. A description of the verification scheme in place will be required as part of the safety case submission.
  • Requirement on operators to report on a range of new hazardous incidents:
    Operators will be required to report where a 'major accident' has occurred, or if there is an immediate risk of a 'major accident'. The definition of 'major accident' in the new SCR has been expanded. The EU have introduced Implementing Regulation No. 1112/2014, which imposes a single Community-wide reporting mechanism on the industry.
  • Outside the EU:
    Authorities are able to request information about operations outside the EU; so consideration should be given to such content.

The French Ministry of Ecology, Sustainable Development and the Energy is currently preparing a set of texts to update the French regulations relating to exploration and exploitation of hydrocarbons, notably to transpose the OSD into French law. These texts may develop alongside the current reform of the mining code.

In particular, the title on drilling (‘Forage’) in the General Regulation of Extractive Industries (Règlement Général des Industries Extractives (RGIE)) and decrees of 6 may 1971 on the exploration of the French continental shelf and the exploitation of its resources are currently being reviewed, to transpose the OSD. Oil companies operating in  French Guyana and  the Mozambique Channel around the Eparses Islands will also be impacted.

Spain has a comparatively small number of offshore oil and gas installations. In Spain, Law 11/2014, revising Law 26/2007, on Environmental Liability, has already transposed one of the provisions of the OSD. In particular, the protection of the environment has been extended to cover potential damage to the environmental state of marine waters. The other provisions on the minimum requirements to avoid severe accidents in operations related to offshore oil and gas operations and to limit the consequences of such accidents are still to be implemented in Spain.

Currently, in Spain, there is a wide set of regulation on safety and environmental protection which is applied in a systematic way to offshore facilities. One of the key challenges of the OSD for operators is that, to date, the extent of requirements imposed under licenses has varied significantly, depending on the EU member state in whose waters operations are carried out. In future, as a result of the OSD, there should be a much greater degree of harmonisation across the EU in terms of the requirements a licence must contain.

Italy has taken several steps towards the implementation of the OSD. Through Law no. 154 of 7 October 2014 the Italian Parliament entitled the government to implement the provisions of the OSD. A preliminary draft of the Legislative Dress drawn up with this aim is in the process of being reviewed by the competent legislative offices of the Italian Parliament.  

The key changes to the existing Italian legislation for Italian owners/operators/licensee (in the bill of the Legislative Decree the "licensee" is defined as "operator") will include the following:

  • Liability for environmental damage of the licensee:
    Licensees will be financially liable for the prevention and remediation of environmental damage caused by offshore oil and gas operations. This liability is additional to liabilities under Legislative Decree no. 152 of 3 April 2006 (“Environmental Code”), which places obligations on the polluter or the owner in case the polluter cannot be identified or fails to carry out the cleanup works.
  • Appointment of the independent offshore ‘competent authority’:
    A competent authority is to be appointed to undertake evaluation procedures with the aim of assessing and accepting reports on major hazards, assessing design notifications, overseeing compliance by licensees with Italian law. This includes inspections, investigations and enforcement actions.
  • Additional burdens with respect to documents to be submitted for carrying out offshore oil and gas operations:
    Licensee will be required to submit additional documents to the competent authority as required by the OSD.
  • Drafting of a specific report on a range of hazards incidents:
    Licensees will be required to draft and periodically submit to the competent authority a specific report describing the hazards for production and non-production installations. 
  • More stringent provisions in relation to safety and environmental management system applicable to the installation:
    Licensees must prepare internal emergency response plans for submission to the competent authority, taking into account the major accident risk assessment undertaken during preparation of the most recent report on major hazards. Detailed notifications are also required to be submitted, including a description of the design of wells and how the proposed well operations will be carried out in accordance with law together with an analysis of the oil spill response effectiveness. Licensees must also arrange for an independent verification system to be implemented with a detailed description of this system submitted to the competent authority.
  • Greater emphasis on the prevention policy:
    Licensees are required to prepare: (i) a document setting out the corporate major accident prevention policy, taking into account its primary responsibility for the control of risks of a major accident resulting from its operations and the improving control of those risks in order to ensure a high level of protection at all times; (ii) standards and guidance on best practice in relation to the control of major hazards throughout the design and operational lifecycle of offshore oil and gas operations. Italian authorities must be informed of major incidents, or imminent risks of one.

There are currently only two major offshore oil and gas drilling operations in German waters (Mittelplate and Entenschnabel). Thus, apart from the companies involved in conducting these operations, there is limited interest amongst German industry as to how the OSD will be transposed in Germany.

 Until now, only two Articles of the OSD have been transposed into German law: Article 5 (environmental impact assessment) through the Verordnung zur Einführung von Umweltverträglichkeitsprüfungen und über bergbauliche Anforderungen beim Einsatz der Fracking-Technologie und Tiefbohrungen, and Article 38 (definition of water damage) through the Gesetz zur Änderung wasser- und naturschutzrechtlicher Vorschriften zur Untersagung und zur Risikominimierung bei den Verfahren der Fracking-Technologie. The Federal Ministry for Economic Affairs and Energy is currently drafting a bill (with the working title: Offshore-Berg-Verordnung), which is intended to transpose the remaining requirements under the OSD. In late June 2015, the cabinet is expected to decide on the proposed bill entering the legislative process.

For more information on the Directive please contact your regular Freshfields contact.