Download - FPSO ASSET INTEGRITY
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15 - 16 October 2015
Crowne Plaza London - Heathrow, London, United Kingdom
th th
FPSO Asset Integrity Managementand Life Extension Forum
Improving cost efficiencies and minimizing shutdown time whist increasing
vessel productivity, value and safety
https://twitter.com/bisgrpcom
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FPSO ASSET INTEGRITY MANAGEMENT AND LIFE EXTENSION FORUM 2015
15 – 16 OCTOBER 2015, LONDON
REGULATION KEYNOTE:LEGAL & REGULATORY TREATMENT OF FPSOS
ALEXANDER REID, PARTNER
T: +44 (0)20 7264 8104
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Overview
Update on treatment of FPSOs by Courts and regulators
Legal classification of FPSOs remains uncertain
Regulatory update
Implementation of the EU Offshore Safety Directive
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Legal and Regulatory Compliance in the current FPSO Market
Market conditions impactingFPSO awards
Clear focus on existing asset
integrity and cost efficiency
Regulatory complianceremains crucial element tocost-effective projects
Source: Pareto Securities (July 2015)
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2010 2011 2012 2013 2014 2015 (Est.)
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Global FPSO Awards
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Risk Management
Industry where identificationand management of risk is apriority
Recent FPSO incidents in2015: Cidade De Sao Mateus /Petrojarl Knarr
Continued uncertainty inrelation to laws and regulationsis a major concern
Cidade De Sao Mateus (Source: Sao Paulo Today)
Petrojarl Knarr (Source: BG Group)
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Key question remains – is an FPSO a "ship"?
How will the Courts and regulators treat the various species offloating exploration, production, storage and offloading vessels?
Potential interpretations:
1. Similar to trading ships; or
2. Similar to permanent offshore installations
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FPSO Characteristics
Need to consider three categories of floating vessels:
1) Craft built to function as "ships"
2) Floating offshore units that do not resemble "ships"
3) Floating units somewhere between these categories
The third category includes FPSOs – common features include:
Resemblance to "ships" in much of their construction
But, do not navigate regularly between places, and may have a connection to thesurface, subsea facilities or the seabed
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Key features and functions of a ship
What are some of the key features and functions that may be relevant in
determining whether an FPSO is a "ship"? Floating?
Not fixed/moored in place?
Ship-shaped?
Self-propelled?
Rudder?
Can navigate independently?
Sea/ocean-going?
Used to navigate between places?
Used in trade and commerce? Used to carry cargo?
The term "ship" has not been clearly defined in International Conventions
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Legal Considerations – is an FPSO a "ship"?
Limitation of Liability –
IMO Conventions:
LLMC 1976 – applies to a range of different claims, including personal injury, wreck removaland property damage:
Covers claims "occurring on board or in direct connection with the operation of a ship" – ship not defined
LLMC does not apply to certain "floating platforms constructed for the purpose of exploring or exploiting
natural resources" –
floating platform also not defined
CLC 1969 (1992 protocol) – applies to pollution claims:
Contains a difficult and convoluted definition:
- "Ship " means any sea-going vessel and seaborne craft of any type whatsoever constructed or
adapted for the carriage of oil in bulk as cargo, provided that a ship capable of carrying oil and othercargoes shall be regarded as a ship only when it is actually carrying oil in bulk as cargo and during
any voyage following such carriage unless it is proved that it has no residues of such carriage of oil in
bulk aboard"
LLMC = Convention on Limitation of Liability for Maritime ClaimsCLC = International Convention on Civil Liability for Oil Pollution Damage
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Interpretation of the definition of a "ship"?
Case Studies
The Santa Fe Magellan The Slops
International Oil Pollution Compensation (IOPC) working group to develop clearguidelines. Latest report published on 11 September 2015
Recommendations:
Non-Exhaustive / Illustrative List of vessels defined as "ships"
Includes: "Offshore craft that have their own independent motive power, steering equipment forseagoing navigation and seafarer on board so as to be employed either as storage units or carriage
of oil in bulk as cargo and that have the element of carriage of oil and undertaking a voyage"
Excludes: "Vessels or craft involved in the production or processing of oil, for example... FPSOs..."
'Grey areas' are to be decided by the 1992 Fund on a case-by-case basis on using the
'hybrid approach' – interpreting the example list and the "maritime transport chain" test
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Other examples
Arrest
1952 Convention applies to "sea-going ships" – not defined
1999 Convention applies to "ships" – again, not defined
Merchant Shipping Act 1995
"Shipowner" is defined as "the owner, charterer, manager and operator of a seagoing ship"
"Ship" includes references to "any structure...intended for use in navigation as a ship"
International Convention for the Control and Management of Ships' Ballast
Water and Sediments 2004
A "Ship" is defined in the convention as:
"A vessel of any type whatsoever operating in the aquatic environment and includes
submersibles, floating craft, floating platforms, FSUs and FPSOs".
Financing Issues
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Legal consequences – why important?
LLMC
If a "ship" under the LLMC, the owner, charterer or operator may be entitled tolimit their liability for certain maritime claims concerning the ship
It not a "ship", there is no such right of limitation
CLC
If a "ship" under the CLC, the owner will be strictly liable for damage caused bypollution from oil cargos, but may be entitled to limit its liability
If not a "ship", there is no such right of limitation
Worked example:
under International Conventions, an owner of a VLCC of 160,000 GT can limitliability to:
LLMC limit = US$90 million
CLC limit = US$135 million
Contrast Deepwater Horizon costs
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FLNG – is it a ship?
4 Floating
X Fixed/moored in place (expected to be for20-25 years)
X Ship-shaped
X Self-propelled
X Rudder
X Can navigate independently
4 Sea/ocean-going
X Used to navigate between places
4 Used in trade and commerce
? Used to carry cargo [depends what wemean by "carry"]
"it depends" until have a reported case, or thereis a convention giving guidance
http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=SErAJaxjLn4LcM&tbnid=BPsVSkuKHsJF-M:&ved=0CAUQjRw&url=http://www.upstreamonline.com/live/article1326372.ece&ei=NrItUoKgHYfL0AXz-YGABg&psig=AFQjCNE0qPtQ2R1fLbHy2Ex1w-6ZvyI_1A&ust=1378812798537332
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Regulatory Update: The Offshore Safety Directive
EU Offshore Safety Directive 2013
Offshore PetroleumLicensing (Offshore
Safety Directive)Regulations 2015
Offshore Installations
(Offshore Safety
Directive) (Safety Case
etc) Regulations 2015
Merchant Shipping (OilPollution Preparedness,Response and Co-
operation Convention)(Amendment) Regulations
2015
Competent AuthorityHealth and Safety Executive + DECC
=Offshore Safety Directive Regulator
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Offshore Safety Directive: Key Features
Regulations came into force in the UK on 19 July 2015 Creation of OSDR as new competent authority
Safety Case Regulations (SCR) 2015
Owners/Operators must prepare and submit a Safety Case to the CA, which must
include:
Corporate Major Accident Prevention Policy (CMAPP)
Description of the Safety and Environmental Management System (SEMS)
Verification / Well examination schemes
Internal Emergency Response procedure
Decommissioning Safety Case
Design / Relocation Notifications
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Offshore Safety Directive: Key Features
Offshore Petroleum Licensing (Offshore Safety Directive) Regulations2015
Licensing authority must consider (a) the "sensitivity" of the marine environment (b)technical / financial capability of licensee
Licensee financially liable for prevention / remediation of environmental damage
Merchant Shipping (Oil Pollution Preparedness, Response and Co-
operation Convention) (Amendment) Regulations 2015
Requirement to have an Oil Pollution Emergency Plan (OPEP) extended to non-production installations / decommissioning
Powers to forbid operations where an OPEP is not in place
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Offshore Safety Directive: Industry Implications
Transitional period for existing installations
Safety cases must be approved by 2016/2018 deadline or date of nextthorough review (if earlier):
- Well operations / non –production installations: 19 July 2016
- Production installations: 19 July 2018
Not a radical overhaul for the UK but increase in reporting requirements
Review existing arrangements
Model for further action in the sector across other regions?
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Lawyers for international commercehfw.com