Offshore Safety Directive (OSD) Update on the Offshore Petroleum Licensing Regulations 2015 Derek Saward DECC EDU OGED 18 th December 2014

Introduction New regulations to implement requirements of Offshore Safety Directive (OSD) Outline provisions for licensing and obligations on licensees Significantly amended to cater for multiple operator model Outline provisions for appointment of OSD operators, and the ‘capacity’ of operators Made under Section 2(2) of European Communities Act Offshore Safety Directive – Industry Update 18 th December 2014

Regulations 1 and 2 Regulation 1- Citation Regulation 2 – Definitions Most definitions based on ‘copy out’ of OSD text Competent Authority – HSE and Secretary of State (SoS) Connected infrastructure – gold plates OSD to meet HSE requirement to include connected wells and supplementary units outside safety zone Licensee – extended provisions to maintain liability following relinquishment, expiry or revocation of licence Licensing Authority – part of the new Oil and Gas Authority Well Operations – based on HSE definition of well 3Offshore Safety Directive – Industry Update 18 th December 2014

Regulation 3 Grant and Transfer of Licences Must consider technical and financial capability of applicants Must consider risks and hazards relevant to the licensed area Must provide details of security to cover liabilities Safety and environmental performance of applicant Sensitivity of local and adjacent environment, and potential cost of degradation of that environment Detailed safety requirements have still to be drafted Where details can’t be provided at the application stage, commitments will be checked prior to operations Licensing authority will consult competent authority 4Offshore Safety Directive – Industry Update 18 th December 2014

Regulation 4 Appointment of Operators Provisions only apply to OSD operators, and do not apply to DECC ‘licence operator’ Operators can only be appointed by licensees or licensing authority (e.g. when an appointment is terminated) Proposed appointments must details functions relating to the appointment Will be able to appoint installation operators and well operators, for different phases of operations Licensing authority will consult competent authority Licensing authority will be able to object to, and effectively prevent proposed appointments 5Offshore Safety Directive – Industry Update 18 th December 2014

Regulation 5 Obligations on the Licensee Must have appropriate provisions in place to cover liabilities prior to the start of offshore operations Must maintain capacity to meet obligations relating to operations undertaken by appointed operators Must ensure production installations only operated in licensed area Must ensure appointed operators have the capacity to meet requirements of relevant functions Must take reasonable steps to ensure that appointed operators carry out functions and duties to meet requirements of OSD 6Offshore Safety Directive – Industry Update 18 th December 2014

Regulation 6 Liability for Environmental Damage Licensees are financially responsible for prevention and remediation of environmental damage as defined in Environmental Liability Directive Liability extends to operations carried out by licensee, on behalf of the licensee, by an appointed operator or on behalf of an appointed operator No previous examples of environmental damage in offshore waters as a result of offshore oil and gas operations that would have qualified for remedial action Potential for significant spill damage and remediation in coastal waters 7Offshore Safety Directive – Industry Update 18 th December 2014

Regulation 7 Capacity of Operators Competent authority can assess capacity and notify licensing authority if performance is considered unacceptable Licensing authority must notify licensees of competent authority’s determination Where licensees are informed of determination, the operator’s appointment is terminated Where an operator’s appointment is terminated, the licensee becomes responsible for carrying out the operator’s functions Where an operator’s appointment is terminated, the licensee must propose a new operator 8Offshore Safety Directive – Industry Update 18 th December 2014

Regulation 8 Information Licensing authority can request information from licensee, proposed operator and operator in relation to their functions under regulations Competent authority can request information from licensee, proposed operator and operator in relation to their functions under regulations Requests must be dealt with in timeframe specified by licensing authority or competent authority (as appropriate) Licensing authority and competent authority can exchange relevant information HSE and SoS can exchange relevant information 9Offshore Safety Directive – Industry Update 18 th December 2014

Regulations 9 and 10 Regulation 9 - Enforcement If the licensee fails to comply with any obligations, the licence can be revoked If the proposed operator fails to comply with any obligations, the proposed appointment can be rejected If the operator fails to comply with any obligations, the appointment can be terminated Regulation 10 – Offences Failing to provide information or providing false information Offshore operations being undertaken by a body other than an appointed operator 10Offshore Safety Directive – Industry Update 18 th December 2014

Regulation 11 Transitional Arrangements Licensing provisions for new licences or new licence transfers will come into effect when regulations come into force Operatorship provisions for new licences / transfers will come into effect when the regulations come into force Operatorship proposals for existing licences will be discussed with operators early in 2015 Well operatorship proposals for operations under existing licences must be fully implemented by 19 th July 2016 Installation operatorship proposals for existing installations must be fully implemented by 19 th July Offshore Safety Directive – Industry Update 18 th December 2014

Next Steps Regulations to be reviewed by second legal adviser Regulations to be checked against draft HSE regulations to ensure there are no contradictions or unnecessary duplication Regulations have been shared with HSE for review by HSE and Treasury Solicitor (TSol) staff Regulations to be shared with industry in January 2015 OSD package government write round in February 2015 with regulations laid in March 2015 after the write round 12Offshore Safety Directive – Industry Update 18 th December 2014