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REGULATION KEYNOTE:
LEGAL & REGULATORY TREATMENT OF FPSOS
ALEXANDER REID, PARTNER
T: +44 (0)20 7264 8104
alexander.reid@hfw.com
Overview
Regulatory update
Implementation of the EU Offshore Safety Directive
16
No. of Awards
14
12
10
8
6
4
2
Regulatory compliance
remains crucial element to
cost-effective projects
0
2010
2011
2012
2013
2014
2015 (Est.)
Risk Management
Continued uncertainty in
relation to laws and regulations
is a major concern
How will the Courts and regulators treat the various species of
floating exploration, production, storage and offloading vessels?
Potential interpretations:
1.
2.
FPSO Characteristics
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
LLMC 1976 applies to a range of different claims, including personal injury, wreck removal
and 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
"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 other
cargoes 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"
Includes: "Offshore craft that have their own independent motive power, steering equipment for
seagoing 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
Other examples
Arrest
"Shipowner" is defined as "the owner, charterer, manager and operator of a seagoing ship"
"A vessel of any type whatsoever operating in the aquatic environment and includes
submersibles, floating craft, floating platforms, FSUs and FPSOs".
Financing Issues
If a "ship" under the CLC, the owner will be strictly liable for damage caused by
pollution 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 limit
liability to:
LLMC limit
= US$90 million
CLC limit
= US$135 million
FLNG is it a ship?
4 Floating
X Fixed/moored in place (expected to be for
20-25 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 we
mean by "carry"]
"it depends" until have a reported case, or there
is a convention giving guidance
Offshore Petroleum
Licensing (Offshore
Safety Directive)
Regulations 2015
Offshore Installations
(Offshore Safety
Directive) (Safety Case
etc) Regulations 2015
Competent Authority
Health and Safety Executive + DECC
=
Offshore Safety Directive Regulator
Merchant Shipping (Oil Pollution Preparedness, Response and Cooperation Convention) (Amendment) Regulations 2015
Requirement to have an Oil Pollution Emergency Plan (OPEP) extended to nonproduction installations / decommissioning