COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT
Date: 2011-10-27
Institutions: European Commission
Subjects: EU waters, environmental liability, man-made disaster, marine pollution, offshore drilling, offshore oil structure, prevention of pollution, safety standard

EUROPEAN COMMISSION 

Brussels, 27.10.2011 
SEC(2011) 1293 final 

COMMISSION STAFF WORKING PAPER 

IMPACT ASSESSMENT  

Accompanying the document 

PROPOSAL FOR THE REGULATION OF THE EUROPEAN PARLIAMENT AND 
OF THE COUNCIL 

on safety of offshore oil and gas prospection, exploration and production activities 

{COM(2011) 688 final} 
{SEC(2011) 1292 final} 
{SEC(2011) 1294 final} 

 
 
  
 
Lead DG: ENER 

Other involved services: ECHO, EEAS, EMPL, ENTR, ENV, JRC, MARE, MOVE, SG, SJ 

Agenda planning or WP reference: 2011/ENER/007 

 
 
 
TABLE OF CONTENTS 

INTRODUCTION............................................................................................................. III 

1.  PROCEDURAL 

ISSUES  AND  CONSULTATIONS  OF 
PARTIES..................................................................................................................... 5 

INTERESTED 

1.1.  Organisation and timing .................................................................................... 5 

1.2.  Consultation and expertise ................................................................................ 5 

2.  PROBLEM DEFINITION AND BASELINE ............................................................ 6 

2.1.  Nature of the problem: A need to further reduce the risks posed by offshore 

oil and gas operations........................................................................................ 6 

2.2.  The extent of the problem ................................................................................. 9 

Geographical extent........................................................................................... 9 

Material extent................................................................................................. 10 

2.3.  Underlying drivers of the problem .................................................................. 11 

2.4.  The Baseline.................................................................................................... 14 

2.4.1.  Problem evolution during the development of offshore oil and gas 

activities in Europe and the effect of existing EU acquis ................. 14 

2.4.2. 

Impacts under the baseline scenario.................................................. 16 

2.4.3.  Foreseen evolution of the baseline .................................................... 18 

2.4.4.  Effects of a "do-nothing" approach ................................................... 21 

2.5.  Need for EU action.......................................................................................... 21 

3.  OBJECTIVES & MEASURES................................................................................. 29 

3.1.  General objectives ........................................................................................... 29 

3.2.  Specific objectives........................................................................................... 29 

4.  POLICY OPTIONS................................................................................................... 30 

4.1.  Overview of the policy options ....................................................................... 31 

4.2.  Description of the policy options .................................................................... 31 

4.2.1.  Option 0............................................................................................. 31 

4.2.2.  Option 1............................................................................................. 31 

4.2.3.  Option 1+........................................................................................... 33 

4.2.4.  Option 2............................................................................................. 34 

4.2.5.  Option 3............................................................................................. 40 

4.3.  Summary of options ........................................................................................ 41 

4.4.  Deferred options.............................................................................................. 42 

5. 

IMPACT ASSESSMENT OF POLICY OPTIONS.................................................. 44 

5.1.  Option 0 - No EU Action ................................................................................ 46 

 
 
5.2.  Option 1........................................................................................................... 47 

5.2.1. 

Impact on risk mitigation .................................................................. 47 

5.2.2.  Regulatory and compliance costs...................................................... 48 

5.2.3.  Social, economic and environmental impacts ................................... 49 

5.3.  Option 1+......................................................................................................... 49 

5.3.1. 

Impact on risk mitigation .................................................................. 49 

5.3.2.  Regulatory and compliance costs...................................................... 50 

5.3.3.  Social, economic and environmental impacts ................................... 51 

5.4.  Option 2........................................................................................................... 51 

5.4.1. 

Impact on risk mitigation .................................................................. 51 

5.4.2.  Regulatory and compliance costs...................................................... 52 

5.4.3.  Social, economic and environmental impacts ................................... 53 

5.5.  Option 3........................................................................................................... 53 

5.5.1. 

Impact on risk mitigation .................................................................. 53 

5.5.2.  Regulatory and compliance costs...................................................... 54 

5.5.3.  Social, economic and environmental impacts ................................... 54 

6.  CONCLUSIONS  OF  IMPACT  ASSESSMENT  ANALYSES  FOR  POLICY 

OPTIONS .................................................................................................................. 55 

7.  PREFERRED POLICY OPTION AND LEGAL INSTRUMENT........................... 59 

7.1.  Preferred option............................................................................................... 59 

7.2. 

Implementing measures for Option 2.............................................................. 59 

7.3.  Preferred form of legal instrument .................................................................. 63 

8.  MONITORING AND EVALUATION..................................................................... 63 

 
 
INTRODUCTION 

The  Deepwater  Horizon  drilling  rig  disaster  on  20  April  2010  cost  11  lives.  The  massive 
escape  of  oil  from  the  faulty  well  caused  significant  environmental,  economic  and  social 
damage. The incident focused the attention of public policy makers around the world on the 
scale  of  risk  in  the  offshore  oil  and  gas  industry.  Whilst  the  regulatory  framework  and 
operating  conditions  in  Europe  are  in  general  different  from  those  in  the  USA,  the  disaster 
provided an impetus for examining the lessons to be learned about the nature of the oil and 
gas industry hazards in EU waters, the capability of industry to prevent them being realised 
and, if there are major incidents, the preparedness to limit and repair the consequences.  

By  reviewing  applicable  European  legislation  and  consulting  with  industry  and  Member 
States'  authorities1,  the  Commission  identified,  in  summer  2010,  shortcomings  in  EU's 
regulatory frameworks and industry practices and started2 preparing to reinforce the safety of 
offshore  oil  and  gas  activities  in  Europe.  In  October  2010  the  Commission  adopted  a 
Communication  "Facing  the  challenge  of  the  safety  of  offshore  oil  and  gas  activities".3 
Following a fitness test of EU legislation to address an even similar to the Deep Horizon, it 
outlined  areas  where  more  coherent  application  of  best  industrial  and  regulatory  practices 
throughout the EU was justified.   

This  Impact  Assessment  has  been  based  on  further  research,  analysis  and  consultations, 
including  a  formal  public  consultation,  all  of  which  build  on  the  initial  work  of  the 
Commission. It establishes, in Chapter 2 the underlying drivers to shortcomings in offshore 
risk  controls  in  the  EU  and  the  need  for  EU  action  to  meet  the  safety  and  environmental 
challenges.  It  articulates  in  Chapter  3  the  general  and  specific  objectives  for  the  enhanced 
prevention of major offshore incidents. In Chapter 4 a number of policy options progressing 
steadily  from  the  current  starting  point  to  more  profound  reforms  are  set  out  and  analysed. 
Each  option  is  assessed  in  Chapter  5  for  its  calculated  environmental,  economic, 
administrative and social impacts. This sets the scene in Chapters 6 and 7 for the selection of 
a preferred option to go forward.  

The  suggested  option  implements,  by  means  of  new  legislation  and  soft  law,  wide  ranging 
reforms that level up the practices in EU Member States with offshore oil and gas activities to 
current best standards. It also provides for greater public transparency about the performance 
of  the  industry  and  the  regulators.  It  eschews  wholly  new  or  unfamiliar  approaches,  and 
thereby avoids the risk of destabilising the currently best performing EU regimes.  

While some of the underlying measures of the preferred option can be implemented without 
delay, others require implementing or delegated acts, with further input from Member States, 
to  complete  their  implementation.  For  three  measures,  due  to  their  complexity,  it  is 
recommended to carry out further evaluation within separate policy development. Those three 
are  described  fully  in  this  report  notwithstanding  they  do  not  form  part  of  the  integrated 
proposal covered by this impact assessment.  

1 Public administration bodies involved in licensing and supervision of offshore activities in Member States. 
2 Statements of Commissioners Oettinger and Damanaki at EP plenary on 7 July 2010 
3 COM(2010) 560 final  

 
 
                                                 
In  Chapter  8  we  suggest  mechanisms  for  monitoring  and  evaluation  of  the  proposals  once 
implemented.  

 
 
1. 

PROCEDURAL ISSUES AND CONSULTATIONS OF INTERESTED PARTIES 

1.1. 

Organisation and timing 

The  preparation  of  the  Impact  Assessment  started  in  late  2010,  partly  building  on  the 
review  of  the  European  regulatory  framework  launched  by  the  Commission  after  the 
Deepwater Horizon accident and on consultations with stakeholders. 

The  analysis  feeding  into  the  Impact  Assessment  was  performed  internally  by 
Commission  services,  partly  with  the  use  of  external  sources  of  information  and 
expertise.  The  Commission's  Joint  Research  Centre  (JRC)  provided  important  input  to 
the  document,  in  particular  to  the  quantitative  analyses.  The  Commission  also  made 
extensive use of studies from external sources, the list of which is available in Annex IX. 

1.2. 

Consultation and expertise 

An  Inter-Service  Group  (ISG)  was  established  in  January  2011  by  the  Directorate-
General  for  Energy  (ENER)  with  participation  from  the  Secretariat  General,  the  Legal 
Service,  the  European  External  Action  Service  and  DGs  ECHO,  EMPL,  ENTR,  ENV, 
MARE  and  MOVE.  The  ISG  met  7  times  between  January  and  June  2011  for  the 
discussions  of  the  scope,  of  interim  analytical  results  and  of  draft  texts  for  individual 
elements of this Impact Assessment report, as well as the public consultation document 
published  in  March  2011  (more  details  further  below).  Bilateral  consultations  with 
individual DGs were undertaken in the same time period. 

In  addition  to  the  internal  Commission  consultative  process  involving  the  above 
mentioned  services,  the  Impact  Assessment  study  drew  on  consultations  with  external 
experts and stakeholders who were consulted throughout the preparation of the work and 
provided invaluable expertise.  

An on-line public consultation was carried out between 16 March and 20 May 2011 to 
ascertain  the  views  of  interested  parties  on  the  need  for  EU  action  in  various  policy 
fields. The consultation was based on a document outlining the key issues and containing 
18  open  questions.  The  public  consultation  resulted  in  65  reactions  and  contributions 
from Member State authorities, industry associations, individual enterprises, NGOs and 
citizens  concerning  various  aspects  of  offshore  safety.  The  contributions  proved  to  be 
instrumental in developing the Impact Assessment and the ensuing legislative proposal. 
The key results of the public consultation are summarized in Annex VII. 

Apart  from  the  on-line  public  consultation,  stakeholders  were  consulted  in  regular 
meetings.  National  authorities  involved  in  the  regulation  and  supervision  of  offshore 
activities have met in four meetings hosted jointly by the Commission and the North Sea 
Offshore Regulatory Forum (NSOAF). The issue of offshore safety was also raised in the 
meetings  of  the  Berlin  Forum  Indigenous  Fossil  Fuels  Working  Group4.  In  addition  to 
the above structured dialogues, numerous meetings have taken place with experts of the 
industry 
International  Association  of  Oil  and  Gas  Producers  (OGP),  national 

4  The  EU  Fossil  Fuels  Forum  (aka.  Berlin  Forum)  is  an  annual  stakeholder  meeting  convened  by  the 
Commission.  Between  the  annual  plenary  sessions,  working  groups  hold  regular  meetings  to  discuss  the 
most topical issues identified at the plenaries. 

 
 
                                                 
associations,  individual  enterprises,  NGOs  and  independent  verification  companies. 
These consultations provided unique access to up-to-date industrial expertise and know-
how. Furthermore, the Commission has regularly attended the meetings of the Oil Spill 
Prevention and Response Advisory Group (OSPRAG) established in the UK. 

Opinions of the Impact Assessment Board 

The first opinion of the IAB was received on 8 July in response of the initial submission 
of  the  Impact  Assessment  on  16  June  2011.  The  IAB  requested  a  resubmission  of  the 
report, with the following recommendations for improvements: 

•  Better define the problem and develop a full baseline scenario in the report 
•  Present a clear intervention logic by better structuring the content of options and 

choices made  
Improve the assessment of impacts  

• 
•  Add stakeholder views throughout the document on key points 
The impact assessment was accordingly reorganised and resubmitted on 31 August. The 
opinion  of  the  IAB,  was  received  on  23  September.  It  recognised  that  earlier 
recommendations had been followed to a significant extent but asked still to: 

•  Better justify grounds for EU action in terms of subsidiarity (see 2.5 "Need for EU 

action") 

•  Further structure the content and choice of options to facilitate the reading and to  
elaborate on the discarded but important options and the plans for their later 
implementation (see Chapter 4, throughout) 

•  Further improve the assessment of impacts and their comparison (see chapter 5, 

Chapter 6 – diagram and text box) 

•  Further incorporate stakeholder views (see mainly Chapter 4 – description of the 

options- but also throughout the report and in updated Annex VII) 

The references in parentheses indicate areas of changes; 

2. 

PROBLEM DEFINITION AND BASELINE 

2.1. 

Nature of the problem: A need to further reduce the risks posed by offshore 
oil and gas operations 

Offshore oil and gas operations entail risks and – as seen in the Gulf of Mexico in 2010 
and elsewhere – the consequences of an accident can be catastrophic. The risks are more 
real than they may appear - it is a matter of public record that in the 31 years between 
Mexico’s 1979 Ixtoc and the 2010 Deepwater Horizon disasters, there have been at least 
9 other offshore disasters of a major scale5, and a large number of lesser incidents that 
could have resulted in total loss of the rig or platform instead of the smaller damage or 
pollution that actually happened in those cases. 

5  Ixtoc  1979/Norway  Alexander  Kielland  1980/Canada  Ocean  Ranger  1982/China  Glomar  Java  Sea 
1983/UK Piper Alpha 1988/Brazil Enchova 1984 and 1988/Thailand SeaCrest (8 of the 91 dead were from 
the  EU)  1989/Brazil  P.36  2001/India  Mumbai  High  2005/Mexico  Usumacinta  2007/Deepwater  Horizon 
2010. Moreover, a well head accident on the Montara platform on 21 August 2009 resulted in a fire and an 
uncontrolled discharge of oil and gas lasting until 3 November 2009. 

6 

 
 
   
                                                 
Some of these happened in Europe (including Norway) or involved European operators. 
The  risks  of  major  offshore  incidents,  although  reduced  in  the  past  decades  in  some 
Member States through major reforms introduced following the Alexander Kielland and 
Piper Alpha disasters6 remain, also in Europe, high. This is evidenced by the persistent 
occurrence  of  tell-tale  signs  (precursors  of  potential  major  accidents7  that  do  not 
materialise - 'near misses') in reports from the European offshore sector. Some reports on 
hazard precursors and risks in fact reveal declining industry performance in the control of 
major offshore risks even in jurisdictions that are considered to feature some of the most 
advanced  safety  regimes8.  For  example,  Norway's  recently  released  reflections  of  the 
state of its offshore industry conclude that the risks of major offshore incidents are higher 
than was previously thought9. 

At the same time, the stress test of the EU regulatory framework carried out in summer 
2010  and  further  developed  during  the  preparatory  stages  of  this  Impact  Assessment 
identified a number of shortcomings in the regulatory framework for the offshore oli and 
gas  activities  in  the  EU.  The  offshore  industry,  including  individual  subsidiaries  of  the 
same  company,  operates  to  different  environmental,  health  and  safety  standards  in 
different European jurisdictions. Those standards are partly guided by local requirements 
and  are  largely  determined  by  national  legislation  since  existing  EU  law  sets  mainly 
minimum  requirements  covering  only  partially  the  relevant  aspects  of  offshore 
activities10. 

The result of the above is that licensing, permitting, environmental protection, technical 
and financial capacity requirements, equipment safety standards, reporting practices and 
inspection regimes vary from Member State to another. This does not create a suitable, 
comprehensive and EU-wide coherent regulatory environment that would prioritize and 
indeed necessitate continuous reduction of risks of major accidents. 

The  differences  in  the  regulation  of  offshore  activities  are  even  more  marked  when 
moving  between  EU  regions.  Whilst  there  are  similarities  in  offshore  hazards,  the 
regulation  of  them  outside  the  North  Sea  is  less  developed  and  does  follow  a  clearly 
specified  model11.  Any  detailed  benchmarking  between  individual  Member  States,  let 
alone amongst them at EU level, is, however, complicated by the lack of transparency, 

6 The Piper Alpha North Sea oil production platform exploded in 1988, killing 167 people. The event was 
caused by failures to operate production systems safely. An earlier incident in the Norwegian North Sea 
resulted in 123 deaths when the Alexander Kielland platform capsized in 1980. These two incidents led to 
reforms of the structural resilience of offshore structures, particularly mobile units. 
7 Precursors of major hazards include hydrocarbon leaks, failures of production process safety control; loss 
of  drilling  well  control;  safety  failure  caused  by  invalid  design  change;  high  number  of  maintenance 
backlogs of safety critical elements. 
8 Norwegian Petroleum Safety Authority Risk Report 2010, ref http://www.ptil.no/news/rnnp-2010-major-
challenges-in-important-areas-article7810-79.html; UK Key Programme 3 (installation integrity) 2007 
report ref http://www.hse.gov.uk/offshore/kp3.pdf and 2009 progress report ref 
http://www.hse.gov.uk/offshore/kp3review.pdf 
9 Norwegian Petroleum Safety Authority Risk Report 2010, ref http://www.ptil.no/news/rnnp-2010-major-
challenges-in-important-areas-article7810-79.html  
10  For  example,  EU  legislation  on  the  authorisation  of  offshore  activities  deals  only  with  competition 
aspects of the procedures; EU directives on product safety apply to equipment on fixed installations but not 
mobile ones (such as was the Deepwater Horizon rig); EU legislation on the health and safety of workers 
introduces i.a. the risk management concept of a health and safety document, however, does not oblige the 
companies to submit that to competent authoritities 
11  For  example,  Romania  and  Bulgaria  have  seemingly  less  comprehensive  regulatory  regimes  than  the 
North Sea states. 

7 

 
                                                 
comparable  data  and  statistics.  The  industry  also  does  not  systematically  share 
information or lessons learnt from incidents and is in complex conditions such as deep 
water. We develop the issue of industry and regulators performance benchmarking – both 
between sectors and between countries – in Annex XIII.  

Moreover,  the  follow-up  to  the  Deepwater  Horizon  in  Europe  or  in  some  EU  Member 
States has revealed that a major accident of similar or even smaller proportions could put 
the available emergency response capacities under a serious strain12. A look at EU shows 
that  the  EU  Civil  Protection  Mechanism's  Monitoring  and  Information  Centre  is 
available for offshore pollution events on a 24/7 basis. However, there are today no EU 
law requirements on issues such as sharing, placing or compatibility of response assets to 
deal with an event, maintenance of industry asset inventories or cross-border emergency 
response.  The  Deepwater  Horizon  response  effort  in  the  US  was  complicated  precisely 
by similar lack of coordination of response inventories and by compatibility problems of 
assets (machinery, etc). 

Finally, the Gulf of Mexico disaster revealed that an extreme damage to the environment, 
and  ultimately  to  marine  and  coastal  economies,  raises  important  questions  about  the 
liability  for  the  damage  and  responsibility  for  its  remediation.  The  EU  does  have  a 
system of provisions for the remedy of environmental damage following an accident. The 
analysis carried out in summer 201013 pointed to some scope to improve the system. For 
instance,  the  fact  that  EU  waste  law  applies  to  oil  spills  by  virtue  of  a  ruling  of  the 
European  Court  of  Justice  has  consequences  on  the  responsibility  of  operators,  so  it 
would benefit from better visibility with guidance from the Commission. Secondly, in the 
framework  of  the  Environmental  Liability  Directive  (ELD),  there  is  a  need  to  ensure 
without any ambiguity that offshore operators are liable not only for damage caused to 
protected species, natural habitats and to the water damage to territorial waters, but also 
damage  to  all  marine  waters  under  the  jurisdiction  of  Member  States.  The  status  quo, 
which  does  not  address  the  latter,  might  perpetuate  the  possibility  that  some 
consequences  of  a  marine  accident  may  be  internalised  at  least  partly  to  the  Member 
State,  contradicting  the  polluter  pays  principle  that  governs  ELD.  Also,  the  current 
framework makes unclear whether Member States could enforce compensation from the 
polluter for the deployment of national contingency assets and for traditional damage in 
case of an emergency of extreme proportions. 

Related  to  the  above  is  the  issue  of  guarantees  of  operators'  financial  strength.  The 
operator of the license in the Deepwater Horizon case estimates the outcome costs of the 
incident  at  $40bn.  Very  few  companies  and  no  existing  risk-pooling  scheme  could 
accommodate such a sum, which would leave the host country exposed to unwarranted 
public financial risk. In the EU, there is no consistent approach that would ensure that the 
"polluter  pays"  principle  would  be  fully  upheld  to  cover  damages  of  a  transboundary 
character  and/or  of  level  seen  in  the  Gulf  of  Mexico.  The  insurance  market  cannot 
furnish  an  instrument  that  guarantees  unlimited  financial  indemnity.  Apart  from  the 

12 The industry itself recognizes that it still lacks equipment to contain oil spills in deep-water or other 
complex environments. For example, OSPRAG has been set up in the UK between industry and regulator 
to review and improve well control and emergency response inventories and financing 
(http://www.oilandgasuk.co.uk/knowledgecentre/OSPRAG.cfm ); the Association of Oil and Gas 
Producers has similarly established a response group to develop improved response and well capping 
capability: http://www.ogp.org.uk/pubs/PressReleases/PR100909.pdf 
13 COM(2010) 560 final and SEC(2010) 1193 final 

8 

 
                                                 
North Sea-based risk pooling arrangement between operating companies14, no guarantees 
amongst Member States or international solutions are in place at present. The absence of 
an international liability regime governing offshore oil and gas accidents (revealed most 
recently equally by the Deepwater Horizon and Montara events, both referenced earlier) 
is in contrast to the maritime transport sector where a body of liability conventions and 
trust funds exist to facilitate compensation of victims.  

As result of all the above, the EU is facing a threefold problem with respect to oil and 
gas activities off its shores: 

First,  the  risk  of  a  major  offshore  oil  or  gas  accident  occurring  in  EU  waters  is 
significant  and  the  existing  fragmented  legislation  and  regulatory  and  industry 
practices do not provide for all achievable reductions in the risks throughout the EU. 

Second, the existing regulatory framework and operating arrangements do not provide 
for the most effective response to all consequences of accidents in EU waters. 

Third,  under  existing  liability  regimes,  the  responsible  party  (such  as  the  polluter  in 
case  of  oil  spill)  may  not  always  be  clearly  identifiable  and/or  may  not  be  able,  or 
liable, to pay all the costs of remedy of the damage caused by its action. 

2.2. 

The extent of the problem 

Both the potential sources of major incidents and areas at risk from them are extensive in 
geographical terms and in the potential material and societal impacts.  

Geographical extent 

Over 90% of oil and over 60% of gas produced in Europe (EU and Norway) comes from 
offshore  operations.  Offshore  operations  (exploration  and  exploitation)  are  ongoing  in 
the territorial waters of 11 Member States. Furthermore, some other Member States plan 
to  commence  drilling  activities  in  the  near  future.  In  total,  over  1,000  offshore 
installations are operating in European waters (including Norway)15. There are more than 
6,000  wells,  more  than  400  of  them  in  Italian  and  Spanish  waters.  These  numbers  are 
growing despite an overall decline in hydrocarbon production. 

The  national  regimes  in  the  North  Sea  region,  while  all  different,  are  the  source  of  the 
most  advanced  risk  control  practices  by  virtue  of  their  goal-setting  regulatory 
approaches. Nevertheless, even in this region the reduction of major hazard risks remains 
a valid concern as reports from relevant authorities reveal16. This is important since the 
majority  of  offshore  oil  and  gas  in  Europe  (EU  &  EEA)  is  produced  in  the  Danish, 
Dutch, German, Norwegian and UK sections of the North and Norwegian Seas.  

14 OPOL (The Offshore Pollution Liability Association LTD) 
15  More  detailed  data  on  European  offshore  activities  are  available  in  the  Commission  Staff  Working 
Document accompanying the Commission Communication "Facing the challenge of the safety of offshore 
oil and gas activities" (http://ec.europa.eu/energy/oil/offshore/doc/sec(2010)staff_working_doc.pdf) 
16 For example, as recently as in May 2010, well control was lost on the Gullfaks C installation in Norway; 
according  to  the  Norwegian  Petroleum  Safety  Authority's  report  on  the  event  issued  later  in  2010,  only 
chance averted a sub-surface blowout and/or explosion. In 2003, windy weather conditions helped to avoid 
an explosion following a gas line rupture on the BP Forties Alpha platform in the UK North Sea. 

9 

 
 
                                                 
Activities  may  be  less  intensive  in  the  Mediterranean  and  Black  Sea  regions  -  most  of 
offshore operations in this region occur in the Italian and Romanian waters while more 
Member States (e.g. Cyprus, Malta) are planning to commence drilling activities in the 
near future. However, the risks associated with the operations may be even higher there 
as,  apart  from  Italy,  the  offshore  oil  and  gas  industry  has  shorter  traditions  and  the 
regulatory  authorities  less  resources  in  those  regions.  In  a  recent  report  to  the  French 
Parliament,  the  risks  from  hydrocarbon  exploration  and  exploitation  activities  in  the 
Mediterranean are underlined, as is the gap between progress of drilling technologies, on 
the  one  hand  and  of  safety  measures  on  the  other  hand.  17Moreover,  instead  of  goal-
setting regulation, EU Member States in these regions apply more prescriptive regulatory 
approaches  which  focus  more  on  detailed  requirements  and  less  on  effective  risk 
control18. 

Material extent 

A  major  accident  at  any  one  of  Europe's  offshore  installations  would  likely  entail 
material  and  costly  damage  to  the  environment,  the  economy,  local  communities  and 
society at large, while the lives and health of those working in the sector may be put at 
risk.  Offshore  accidents  and  failures  of  production  equipment  can  result  in  significant 
damage and extremely high flow-rates of oil and gas. This can create challenges for the 
rescue  of  a  substantial  workforce  isolated  a  great  distance  from  land,  and  also  for  the 
arrest and containment of the oil or gas spill itself. As past accidents have clearly shown, 
coping  with  such  situations  after  they  have  arisen  requires  mobilisation  of  massive 
international expertise and physical assets19. 

The direct impacts of an offshore incident on the health and safety of offshore workers 
are  obvious  from  events  like  Deepwater  Horizon  and  Piper  Alpha.  Crude  oil 
contamination  of  oceans  and  seas  can  also  have  a  detrimental  impact  on  marine  and 
coastal  ecosystems  (damage  to  marine  waters  and  to  protected  species  and  natural 
habitats), the full extent of which can only be assessed several years after the event. And, 
as  seen  in  the  Gulf  of  Mexico,  major  disasters  damaging  such  ecosystems  can  also 
directly jeopardise the health and livelihoods of coastal communities.  

Finally, there can be indirect impacts on other activities linked to the sea. This includes 
ports,  but  also  agriculture  and  power  stations  with  sea  water  intake20.  Other  important 
indirect impacts include the potential loss of major corporate earnings and its affect on 
investments  (pension  funds,  for  example,  suffered  badly  as  a  result  of  the  Deepwater 
Horizon incident), interruptions to other offshore sectors, such as wind farm construction 
and operation, or maritime transport. 

Societal extent 

The national economies of the coastal Member States affected by the incident would be 
placed under pressure by a large release of oil into the seas as a result of public aversion 

17 "La pollution de la Mediterranée: état et perspective à l'horizon 2030" Office Parlementaire d'évaluation 

des choix scientifiques et technologiques, Juin 2011, p.44-48 

18 The presecriptive approaches have been abandoned in the North Sea region during the reforms following 
major  accidents  in  the  1980s;  they  are  now  also  under  revision  in  the  US  following  the  Deepwater 
Horizon. 
19 More details on the costs of Deepwater Horizon rescue and clean-up in Annex I. 
20 ITOPF Handbook 2010/2011 describes these impacts based on experience from some 10 000 oil spills.  

10 

 
                                                 
to a large scale disaster in EU waters within the time frame in which a recurrence might 
be  anticipated  (twenty  years).  In  addition,  a  major  incident  in  the  EU  would  probably 
limit activity through moratoria or even lead to termination of offshore licensing21. 

The  economy  relating  to  the  offshore  oil  industry,  including  its  suppliers  would  be 
severely  affected  by  such  restrictions.  The  companies  directly  concerned  may  fail, 
market  and  public  confidence  may  falter,  and  national  production  of  oil  and  gas  may 
diminish. All of these outcomes would impact negatively on state revenues. Equally, the 
security and affordability of oil and gas supplies could be affected. Offshore oil and gas 
form  a  significant  and  increasing  share  of  total  oil  and  gas  production,  so  any  loss  of 
access  to  indigenous  European  reserves,  or  uncertainty  about  access,  would  have 
implications for EU's supply of oil and gas and possibly for energy markets. 

2.3. 

Underlying drivers of the problem 

The threefold problem (significant and insufficiently mitigated risks of a major accident; 
the insufficiency of existing provisions to ensure most effective emergency response; the 
incompleteness of existing liability regimes) which characterizes the present offshore oil 
and gas operations in Europe is the result of a confluence of factors.  

The risky nature of the offshore oil and gas sector and the persistence of those risks in 
Europe  are  driven  by  factors  related  to  the  industry  as  well  as  to  the  regulation  and 
oversight the sector is subject to. Many of the present operations in Europe take place in 
maturing  fields  -  roughly  half  of  the  producing  installations  in  the  North  Sea  are  past 
their predicted production life and the mobile rig fleet is ageing, with a number of mobile 
rigs  of  70’s  vintage.  The  business  models  applied  by  operators  reflect  the  maturing 
operating  environment  –  the  major  players  are  moving  on  to  frontier  areas  (e.g.  deep 
water,  high  pressure  zones  –  with  higher  risks  associated  with  the  potentially  high 
rewards),  disposing  of  their  ageing,  high  cost  platforms  in  more  standard  locations  to 
smaller companies specialized on low yield, low capital operations. This trend may entail 
higher risks both on account of new operations shifting to more complex environments 
and  on  account  of  specialist  companies  having  possibly  less  financial  strength  and  less 
in-house  expertise  to  ensure  comprehensive  risk  mitigation  and  to  cope  fully  with 
liabilities in case of a major incident.  

These  industry-wide  characteristics  are  compounded  with  factors  related  to  company-
specific corporate practice. As evident from the persistent levels of legal enforcement in 
the  high  activity  region  of  the  EU  (northern  North  Sea  –  where,  significantly, 
enforcement data is accessible)22, there is lack of evenness in compliance of individual 
operators  with  the  rules  and  regulations  applicable  in  respective  jurisdictions.  The 
compliance challenge can be seen as a reflection of the state of the safety culture of the 
industry23 and further results in inconsistent application of best practices and techniques 
when dealing with broadly similar problems.  

21 In the USA, for example, there are offshore production sites from where the sector is now banned 
22  UK  offshore  enforcement  statistics  since  2001/02  (comprising  the  total  number  of  prosecutions  and 
statutory improvement or prohibition notices) are broadly steady over the past 10 years at 49/year (2010/11 
provisionally = 47). See Annex 13 for more information on benchmarking between sectors/countries.  
23  An  Advisory  Committee  set  up  by  UK's  Health  and  Safety  Executive  (HSE)  produced  already  in  the 
1990s  a  definition  of  safety  culture  that  has  been  re-used  extensively:  ‘The  safety  culture  of  an 
organisation  is  the  product  of  individual  and  group  values,  attitudes,  perceptions,  competencies,  and 

11 

 
                                                 
Drivers  related  to  the  quality  of  the  current  frameworks  for  regulation  and  oversight 
reflect  the  fact  that  there  is  not  a  consistent  approach  to  regulation  of  the  oil  and  gas 
sector despite its unique mobile, global nature (including the fact that an incident in one 
jurisdiction can cause pollution in others). Partly because of the unique characteristics of 
the sector, EU instruments that are effective for safety and environment risk assessments 
or  which  drive  consistent  equipment  standards  in  other  sectors,    do  not  have  the  same 
impact  offshore24.  Moreover,  there  is  uneven  technical  expertise  amongst  regulators  in 
the EU, who however play a crucial role in verifying that operators correctly account for 
the safety and long term integrity of their undertakings.  

The second aspect of the identified problem, namely the suboptimal level of provisioning 
for effective emergency response to offshore oil and gas accidents affecting the EU, can 
be  generally  seen  as  driven  by  an  overall  unsatisfactory  state  of  risk-based  emergency 
planning  by  public  authorities  and  industry.  The  factors  that  make  offshore  accident 
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 of an incident.  

Inconsistencies exist in emergency planning between Member States. Some do cooperate 
with  neighbours  on  emergency  planning,  but  overall  the  current  situation  does  not 
guarantee that in a large-scale emergency the deployment of national assets, coordination 
by national representatives, consideration to adjoining Member States and others, and the 
interaction with EU marine contingency instruments (such as those handled by EMSA) 
will  be  as  smooth  as  it  could  be.  Besides  consistency  and  compatibility  of  national 
resources, risk-based planning also requires transparency and sharing of information on 
risks and 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 recent report of the US Coastguard has been 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  is  also  reported  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.  While  the  situation  in  EU  appears  different 
where a risk based or goal setting regime is deployed – such as the Member States in the 
North  Sea  region  –  the  current  lack  of  information  on  industry  emergency  response 
inventories  puts  limits  to  the  extent  to  which  industry  emergency  resources  can  be 
incorporated in national and EU emergency planning.  

Finally,  the  uncertainty  about  the  consistency  with  which  the  "polluter  pays"  principle 
could be applied in the EU in case of an offshore accident comparable to the Deepwater 
Horizon can be attributed to two main factors. First, existing EU legislation concerning 
environmental liability (Environmental Liability Directive 2004/35/EC) does not extend 

patterns of behaviour that determine the commitment to, and the style and proficiency of, an organisation’s 
health and safety management.  
24  We  explain  further  in  Annex  X that  (i)  the  Drilling  Extractive  Industries  Directive  92/91/EEC  (safety 
risk  assessment  documents)  cannot  be  amended;  (ii)  the  Seveso  2  Directive  96/82/EC  (risk  assessments 
and  joined  up  inspection  and  emergency  planning  for  both  safety  and  environment)  is  not  suited  to 
offshore application; and there is a range of equipment standards applying to fixed platforms that are not 
applicable to mobile ones, because they are regarded inappropriately as ships. 

12 

 
                                                                                                                                                 
the obligation of remedy for  water damage beyond territorial waters (12 nautical miles, 
i.e.  about  20  km).  The  EU  Marine  Strategy  Framework  Directive  extended  in  2008 
protection  by  EU  environmental  law  to  all  marine  waters  under  Member  States 
jurisdiction. This inconsistent legal situation could come into question, even in case of an 
offshore  accident  of  even  smaller  proportions  than  the  one  in  the  Gulf  of  Mexico. 
Second,  apart  from  the  North  Sea-based  risk  pooling  arrangement  between  operating 
companies, no guarantees amongst Member States or international solutions are in place 
at present to ensure that liable party(ies), once established beyond question, would be in 
the financial position to cover the requisite sums from its resources. The estimates of the 
Gulf  of  Mexico  damages  go  up  to  $40bn;  such  damages  in  Europe  would  exceed  the 
financial  capacity  of  most  operators.  This  is  a  complex  driver  that  is  given  added 
momentum  because,  currently,  compensation  is  unlikely  to  be  available  in  time  to 
prevent failure of the innocent businesses affected by the incident. 

To summarize, the table below presents a synoptic overview of the hierarchy of drivers 
identified in the preceding text and links them to the three distinct aspects of the overall 
problem; more detailed description for each category and individual drivers can be found 
in Annex III. 

Table 1 
Drivers of the significant and insufficiently mitigated risks in European offshore operations 

Driver category 

Underlying drivers 

Industry evolution 

Ageing infrastructure and maturing industrial environment 

Structural shift of the industry towards diversification 

Shift to "frontier" operations and new technologies 

Company-specific 
practices 

corporate 

Inconsistent use of state of the art practices and technology 

Failures of compliance with rules and standards 

Inadequate/uneven safety culture in companies 

Drivers  related  to  the  regulatory 
framework 

Uneven technical expertise amongst regulators 

Suboptimal transparency and sharing of information 

Fragmented regulatory framework 

Drivers of the suboptimal level of emergency preparedness 

State of risk-based planning  

Inconsistencies in emergency planning between MS 

Cross-border incompatibility of response assets 

Integration  of  public  and  industry 
plans and assets 

Lack of information on industry emergency response inventories 

Consistency in the quality of company emergency plans 

Drivers of the inadequacy of liability provisions 

Clarity  and  comprehensiveness  of 
liability provisions 

Clarity and scope of EU legislation on environmental liability 

Lack of financial security and guarantees to cover liabilities 

Inadequate compensation schemes for traditional damages, different national 
rules for civil liabilities 

13 

 
2.4. 

The Baseline  

The baseline scenario evaluates the developments assuming that no policy change takes 
place at EU level.  

2.4.1.  Problem evolution during the development of offshore oil and gas activities in 

Europe and the effect of existing EU acquis  

The  EU  has  over  time  developed  a  body  of  legislation  relevant  to  certain  aspects  of 
offshore  oil  and  gas  operations.  This  covers,  at  least  to  some  extent,  authorisation 
procedures,  occupational  hazards  and  worker  safety,  environmental  risks  and  their 
prevention, equipment safety, liability for environmental damages, etc. A comprehensive 
overview of the applicable EU aquis and an analysis of its adequacy are given in Annex 
V. The legislation is complemented by agreed policies, such as EU's Integrated Maritime 
Policy (IMP) which aims at a coherent policy approach by the EU to the oceans, seas and 
coastal areas and provides context for specific tools for good governance of the marine 
space and its resources. The comprehensive picture is described in following diagram. 

Diagram 1 

The  North  Sea,  together  with  the  adjacent  Norwegian  Sea,  has  almost  50  years  of 
experience of oil and gas operations. Building on the lessons of two unrelated offshore 
disasters in the 1980's in which 291 men died25, the North Sea regulatory regimes have 
been  reviewed  and  extensively  revised  in  a  number  of  national  jurisdictions,  including 
the UK, the Netherlands, Denmark and Norway.  

25 Alexander Kielland 1981; Piper Alpha 1988 

14 

 
 
                                                 
In  brief,  European  countries  most  experienced  with  offshore  activity  –  including  major 
incidents  –  have  developed  on  the  basis  of  the  acquis  relatively  consistent  regimes  for 
controlling major hazards. These are on one hand often regarded at present as world class 
although on the other hand are by those countries themselves recognized as deserving of 
further improvements and strengthening. In the wake of the Deepwater Horizon disaster, 
their  authorities  have  been  conducting  own  reviews  of  the  systems:  for  example 
Norway's recently released report26 points out areas for significant improvements despite 
the  fact  that  the  Norwegian  safety  regime  is  generally  regarded  as  top-level  by  global 
comparison. 

Box 1: Offshore Regimes applying to North Sea 

The roughly comparable model for the North Sea is as follows. An aspiring operator acquires a license to 
explore from the Government Ministry sponsoring the development of oil and gas reserves (the licensing 
authority), and he thereby is appointed an operator, for exploration only. The operator determines that he 
needs to drill in some specific locations and produces a well plan which he sends to the safety regulator for 
any comments or further requirements (the licensing authority has no role to play in this procedure). The 
well  must  be  drilled  by  a  mobile  rig  that  has  a  'major  hazards  report'  which  is  acceptable  to  the  safety 
regulator. This report (called a safety case in the UK) describes the major hazards the rig may encounter in 
the range of wells for which it is designed (e.g. water depth, subsurface pressures) and the means to control 
them.   

Should the operator find by his drilling results that he has a commercial production field, he will send to 
the  licensing  authority  a  field  development  plan  and  apply  for  a  production  license.  There  is  now  much 
more information available to the licensing authority of the hazards and technical challenges for optimum 
production and minimum environmental impact to feed into the production licensing decision. Should the 
operator be appointed under a production license, he will now begin to produce detailed engineering plans 
and begin negotiations with the safety regulator and submit a 'major hazards report' (aka 'safety case' in the 
UK)  to  the  safety  regulator.  The  report  will  demonstrate  how  the  identified  major  hazards  of  the 
production facility at its precise location will be controlled (which is different from the mobile rig major 
hazards  report  described  earlier  which  is  generic  to  the  range  of  wells  it  may  drill).  The  production 
facilities  may  not  be  operated  unless  the  measures  contained  in  the  report  are  acceptable  to  the  safety 
regulator. The licensing authority has, again, no part in this formal safety assessment procedure. 

Where  regimes  differ  within  the  North  Sea  region  is  whether  the  safety  regulator  issues  a  statutory 
acceptance  of  the  submitted  report  (Norway  and  the  UK  do  this,  Netherlands  and  Denmark  do  not).  In 
addition there are differences in the way environment and preparedness/response to pollution are regulated. 
In Netherlands this is an integrated function by a single regulator; in the UK, environment regulation is in 
the  sponsoring  Ministry,  and  safety  regulation  is  structurally independent from industry sponsorship and 
therefore also from environment regulation.     

The  recent  events  and  trends  in  the  industry  however  point  to  the  need  of  renewed 
attention  to  the  current  operation  and  regulatory  models.  The  move  to  "frontier" 
operations  described  in  the  section  on  risk  drivers  is  taking  place  in  all  regions  in  and 
around  Europe.  About  one  fifth  of  deepwater  discoveries  worldwide  were  made  in 
European, mainly Norwegian, waters in 2009-201027. This shift poses new challenges to 
both  industry  and  regulators  and  motivates  the  search  for  improvements  even  in  those 
European  jurisdictions  considered  most  advanced  as  regards  offshore  risks  regulation. 
Offshore  production  also  occurs  in  the  Mediterranean,  the  Black  and  the  Baltic  Seas. 
With the exception of Italian waters, activities in these areas are relatively recent but are 
increasing.  Some  of  these  countries  have  less  experience  in  managing  offshore 
operations. 

26 Norwegian Petroleum Safety Authority Risk Report 2010, ref http://www.ptil.no/news/rnnp-2010-
major-challenges-in-important-areas-article7810-79.html  
27 PFC Energy memo "Deep and ultra-deep discoveries continue apace", 8 November 2010  

15 

 
                                                 
2.4.2. 

Impacts under the baseline scenario 

The  likely  economic  cost  and  the  probability  of  offshore  accidents  in  the  EU-27  under 
present regulatory and technological conditions have been assessed and are presented in 
detail  in  a  fully  developed  analysis  of  the  baseline  scenario  in  Annex  I.  The  analysis 
covers  accidents  resulting  in  major  oil  spills  (principally  blowouts)  and  accidents 
resulting in significant losses to life and infrastructure ("major accidents"). 

Available  statistics  indicate  that  major  offshore  events  –  stemming  from  irregular 
situations and leading to either risks of or occurrence of damage – occur more frequently 
than is commonly assumed. A database of offshore blowouts and well releases includes 
573  such  incidents  that  have  occurred  worldwide  since  195528.  In  the  UK  and  Norway 
alone,  2.3  such  incidents  occurred  per  year  between  1980  and  2008  on  average.  A 
detailed analysis is provided in Section 2 of Annex I. 

The  analysis  of  past  accidents  (see  Section  1  in  Annex  I)  also  shows  that  costs  of 
offshore accidents tend to be significant even if the most serious large blowouts (which 
may cause economic damage of hundreds of millions to billions of euros) are excluded29. 
While the economic costs of offshore accidents depend on a number of factors (such as 
the  type,  scale,  time,  location  and  duration  of  the  event),  case  histories  and  studies 
indicate that even offshore accidents not qualifying as low-probability/high-impact cases 
can be expected to cause economic damage in the order of tens of millions of euros and 
upwards. 

Combining probability statistics with available cost data from past accidents allows for a 
theoretical estimate of an annualised average value for direct, tangible costs for offshore 
accidents in Europe. The analysis presented in Annex I shows that this value depends on 
a range on assumptions and, crucially, on the extent to which the available data on the 
damage  from  the  Deepwater  Horizon  accident  are  incorporated.  Being  unique  in  its 
extent, that accident does impact the calculations heavily while discussions continue as 
to  the  degree  to  which  the  available  data  can  be  considered  indicative  of  a  general 
picture.  These  considerations  point  to  the  need  to  establish  a  value  range  rather  than  a 
singular value for the estimate of levelized average annual costs of offshore accidents in 
Europe. Accordingly, the analysis, presented in full detail in Annex I, results in a value 
range of €205 – 915 million 30. 

Box 2: Estimated annual cost of offshore accidents for the Baseline scenario 

28  SINTEF  Offshore  Blowout  Database,  http://www.sintef.no/sintefcom/Technology-and-Society/Safety-
Research/Projects/SINTEF-Offshore-Blowout-Database/ 
29  It  is  relatively  rare  for  blow-outs  occurring  on  the  scale  of  Norway's  Ekofisk  (1977),  Mexico's  Ixtoc 
(1979/80), UK's Ocean Odyssey (1988), USA's Timbalier Bay (1992) and Deepwater Horizon (2010), and 
Egypt's Temsah field (2004). Loss of well control resulting in small blowouts and well releases of the scale 
of Australia's Montara (non fatal/destructive but polluting) make up the greater proportion of incidents in 
the referenced (SINTEF) database  
30 Assuming a recurrence rate of 35 years for each major incident and an average economic cost range of 
€5 billion (clean-up only) - €30bn (full economic cost),
year. Add to this an estimated annual figure of €65 million in property losses resulting from more common 
less serious documented accidents. These estimates are based on detailed probability and accident statistics 
analyses in Annex I. 

 this amounts to costs of €140 - €850 million per 

16 

 
 
                                                 
The  cost  of  accidents  in  the  offshore  oil  and  gas  industry  is  associated  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 facility 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 would be a complex undertaking due to 
the  scarcity  of  comparable  data.  For  this  reason,  this  impact  assessment  covers  only  the  two    largest 
directly quantifiable categories of cost i.e. infrastructure losses and costs associated with the cleanup of oil 
spills. In this respect the results can be considered conservative.  

The annual cost of offshore accidents is 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,31 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 are distinguished: 
- oil well blowouts, and  
- other major accidents (e.g. releases, fires and explosions, with multiple injuries or fatalities, total loss or 
severe damage to offshore units and/or small size environmental pollution). 

The average cost of major offshore accidents - taking into consideration case histories which indicate that 
this  cost  ranges  from  few  tens  of  millions  of  euros  up  to  hundreds  or  even  exceeding  1  billion  –  is 
estimated at €50 million. Historical  data from major accidents occurred in the North Sea in the years 1970-
2007 indicate an aggregated rate of 2.6 major accidents per year, with a declining trend for the last years. 
Adjusting for this trend, the rate becomes 1.3 major accidents per year. This brings the annualized cost of 
major offshore accidents at €65 million .  

The cost of an oil well blowout depends on the duration of the blowout, i.e. on the amount of oil spilt into 
the  sea.  The  main  cost  component  here  is  clean-up  of  the  oil  spill.  The  average  per-tonne  cost  varies 
among different countries, ranging from €2500 for UK to €18500 for Norway. This brings the estimated 
average cleanup cost for an oil well blowout lasting for ca. 50 days to €5 billion. This figure is the lower 
bound  of  the  blowout  cost,  with  upper  bound  being  the  cost  of  the  Macondo  accident,  which  was  €30 
billion. Therefore the blowout cost is estimated to be in the range €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. This figure was adjusted to count for oil wells – taking into account the lower frequency of oil well 
blowouts  with  respect  to  gas  wells  –  and  for  relatively  large  duration  (i.e.  for  an  interval  with  a 
representative  duration  of  ca.  50  days)  and  resulted  in  a  probability  of  2.7×10-2  per  year,  or  –  in  other 
words – a recurrence period of 35 years. 32 

31  Sources:  “Risk  Assessment  Data  Directory  –  Major  Accidents”,  Report  No.  434-17,  March  2010, 
International  Association  of  Oil  and  Gas  Producers;  “Risk  Assessment  Data  Directory  –  Blowout 
Frequencies”,  Report  No.  434-2,  March  2010,  International  Association  of  Oil  and  Gas  Producers; 
“Blowout  and  Well  Release  Frequencies  –  Based  on  SINTEF  Offshore  Blowout  Database,  2005”, 
26/06/2006, Scandpower.  

32  Reports  commissioned  by  some  Trade  Associations  suggest  different  interpretations  regarding  the 
Commission's data analysis on the frequency of blowouts. These interpretations were analysed but not 
considered  fully  convincing.  It  has  been  suggested  that  industry  and  regulators  may  want  to 

17 

 
 
                                                 
Annualizing  the  blowout  cost  (€5-30  billion)  over  the  period  of  35  years,  we  get  an  annual  oil  well 
blowout cost in the range of €140-850 million . Adding to this an annual figure of €65 million in property 
losses  of  less  costly,  but  more  common,  major  accidents,  the  annual  direct  tangible  cost  of  offshore 
accidents in Europe is estimated at €205-915 million . 

2.4.3.  Foreseen evolution of the baseline  

In the wake of the Deepwater Horizon accident, steps are and will be taken by individual 
Member  States,  international  bodies  and  industry  as  a  response  to  the  lessons  learned 
from  the  accident.  However,  there  is  considerable  heterogeneity  in  the  responses  seen 
from  these  entities  so  far.  The  three  main  areas  in  which  some  evolution  is  anticipated 
are: regulatory; industry/corporate; and international agencies and associations. 

2.4.3.1.  Regulatory framework evolution  

Some national authorities have applied an intensification of inspection effort, operational 
restrictions,  and  the  development  of  new  designs  for  emergency  response  equipment33. 
Some other Member States report that their systems are adequate and robust34. The most 
intense activity is where the regimes are already most advanced. 

At the international level, there are various activities focusing on improving standards in 
offshore  drilling  (i.e.  pre-production  stages).  This  is  to  be  expected  but  somewhat 
overlooks the risks arising from offshore production; an area where regulators in the UK 
and Norway have also reported concerns. International activity on some relevant issues 
can be observed at a regional level, such as OSPAR (the Convention for the Protection of 
the marine Environment of the North-East Atlantic), the North Sea Offshore Authorities 
Forum (NSOAF) and the USA, and at a global level, such as the International Regulators' 
Forum  (IRF)  and  the  G-2035.  However,  because  there  is  no  overarching  authority  to 
either drive progress towards goals, or to ensure compliance with the delivered outputs, 
these  efforts  are  unlikely  to  bring  about  rapid  improvements.  For  example,  recent 
discussions within OSPAR show a clear preference to await EU action before developing 
any appropriate measures at regional level. 

Member  States  measures  for  licensing  of  exploration  and  production  operators  will 
continue to be inconsistent regarding capability of applicants to control the major hazard 
risks and pay for the consequences thereof. For operations subsequently carried out under 
the  authority  of  the  license,  but  subject  to  specific  regulations,  MS  regulatory  models 
will  continue  to  be  widely  separated  and  risk  control  measures  less  well  regulated  in 
some  Member  States.  For  example:  no  clear  joint  authority  approach  to  safety  and  the 
environment in some countries compared to others; no process of 'accepting' a safety case 
in some countries; and continuing with a discredited prescriptive approach to regulation 
and inspection in others. 

collaborate  on  updating  the  international  incident  tables  in  the  light  of  the  Deepwater  Horizon  and 
other recent accidents 

33  E.g.,  the  UK  decided  to  hire  new  inspectors  and  to  increase  the  number  of  offshore  environmental 
inspections from 60 to 150 annually while Italy placed temporary limits on offshore activities in its waters. 
34 Results from the DRILLEX Questionnaire sent to OSPAR contracting parties. 
35 G-20 Global Marine Environmental Protection (GMEP) Working Group 

18 

 
 
                                                                                                                                                 
The  overarching  provisions  for  safety  and  health  from  drilling  extractive  industries 
Directive  (92/91/EEC)  will  continue  to  be  silent  on  preventing  environmental  impact; 
emergency preparedness and response; and submission of formal hazard assessments by 
operators  for  acceptance  to  the  competent  authority.  Other  regulatory  anomalies  will 
persist – e.g: machinery standards that apply to fixed platforms will not apply to mobile 
drilling  rigs;  Environmental  Liability  Directive  (ELD)  2004/35/CE  will  only  apply  for 
water damage inside the 20km line. 

The problem of low transparency in the offshore sector and the continuing low level of 
public  confidence  as  a  result  will  not  be  addressed.  Similarly,  the  heterogeneity  of  the 
regulatory organisations around the EU will not encourage operators to react in a positive 
way to the current inconsistent industry performance in different Member States. 

2.4.3.2.  Industry developments 

Action  by  individual  companies  is  understandably  proving  to  be  uneven:  some  have 
announced  and  already  implemented  specific  measures  in  the  wake  of  the  Deepwater 
Horizon disaster, others are less proactive. Commission inquiries and consultations with 
industry  have  resulted  in  information  and  data  inputs  from  20  oil  and  gas  companies 
active  in  EU  waters.  Whilst  several  of  these  have  specified  measures  undertaken  –  for 
example,  to  increase  internal  compliance  with  procedures,  verify  well  designs, 
emergency  procedures  and  reassess  the  way  risks  are  evaluated  –  others  have  simply 
described  how  their  internal  control  systems  and  processes  are  applied,  and  vowed  to 
stay vigilant, with no concrete measures for change outlined. Very few of these responses 
have  actually  yielded  concrete  company  plans  for  changes  to  operations  in  the  future, 
although  these  were  specifically  asked  for  by  the  end  of  2010.  Furthermore,  additional 
follow-up  exchanges  between  October  2010  and  May  2011  with  the  offshore  industry 
have yielded some quantification of measures taken to improve offshore safety practices 
from only 2 companies, making it extremely difficult to assess and verify which changes 
to operational practises the industry actually intends to implement. 

Joint industry initiatives, at times in cooperation with national administrations, have been 
launched in certain Member States and at a global level to address some of the problems 
and  challenges  currently  being  faced36.  Industry  initiatives  to  develop  capping  and 
containment  devices,  described  in  detail  in  Annex  XII,  are  certainly  commendable,  but 
the  availability  of  operable  equipment  for  all  foreseeable  emergencies  is  presently 
uncertain. Furthermore, these types of measures target first and foremost improvements 
in emergency response rather than accident prevention, whereas industry agrees the latter 
is the highest priority. For all of these initiatives, which are largely just recommendations 
or  designs  at  the  moment,  the  greatest  challenge  will  lie  in  their  implementation  and 
enforcement. 

Even with the actions by individual companies and industry as a whole, some issues will 
continue  to  dominate  corporate  agendas:  how  to  offload  ageing  installations;  insoluble 
scarcity of skills; technical challenges of new frontiers; pressure on EU cost base relative 
to other oil basins where the same price is paid per barrel; increasing diversification of 

36  The  Global  Industry  Response  Group  (GIRG)  was  created  within  the  International  Association  of  Oil 
and Gas Producers (OGP) to assess current practices and consider improvements. The Oil Spill Prevention 
and Response Advisory Group (OSPRAG) was established by Oil & Gas UK to provide a focal point for 
the sector’s review of the industry's practices in the UK.  
19 

 
                                                 
companies,  with  smaller  less  capable  companies  acquiring  licenses  and/or  old  assets  in 
MS regions. 

Individual oil companies and drilling contractors will continue to react to the drivers to 
reduce  costs;  with  continuing  divestment  and  acquisition  and  contractorisation,  loss  of 
corporate memory will not be stemmed; there will continue to be inconsistent standards 
of  well  control  and  process  safety  within  the  same  companies  operating  in  different 
Member  States  -  particularly  where  regimes  are  not  risk  based  -  and  between  different 
companies operating in the same regions. 

2.4.3.3.  Prospects of a global solution 

Considering that most of the problem drivers identified in Annex III are not exclusive to 
European  marine  areas  and  that  many  oil  and  gas  companies  operating  in  the  EU  are 
active across the world, a global solution is certainly desirable. An international solution 
would also present the considerable advantage of a global level playing field. During the 
last  year,  efforts  in  various  international  fora  have  been  already  made  or  proposed  to 
improve the safety of offshore oil and activities across the world. While these efforts are 
commendable, they are not without their limitations.  

A  framework  for  a  global  regime  could  be  sought  in  the  G-20,  the  members  of  which 
cover  most  major  offshore  basins.  In  June  2010,  the  declaration  of  the  G-20  Toronto 
summit recognized the need to share best practices to prevent accidents and to protect the 
marine  environment.  For  this  purpose,  the  Global  Marine  Environmental  Protection 
(GMEP) working group  was  set  up.  The discussions in this group are useful but so far 
have  been  limited  to  a  sharing  of  best  practices  and  are  unlikely  to  result  in  a  binding 
international framework in the foreseeable future. 

Another forum for aiming at a global solution is the International Maritime Organization 
(IMO) which has already established a comprehensive legal framework in the shipping 
sector. Besides the rather protracted timeframe for putting the IMO framework in place 
(up  to  10-15  years),  the  IMO  suffers  from  the  lack  of  proper  means  to  ensure  that  its 
regulations  are  applied  throughout  the  world,  thus  IMO  regulations  are  not  applied 
everywhere with the same rigour37 

On  the  other  hand,  at  the  regional  level,  the  EU  is  Contracting  Party  to  the  Barcelona 
Convention together with 21 other Mediterranean countries. The Offshore Protocol of the 
Barcelona  Convention  for  the  Protection  of  the  Marine  Environment  and  the  Coastal 
Region of the Mediterranean deals with pollution concerning a wide range of exploration 
and  exploitation  activities,  permit  requirements,  removal  of  abandoned  or  disused 
installations,  use  and  removal  of  harmful  substances,  liability  and  compensation 
requirements,  regional  coordination,  safety,  contingency  planning  and  monitoring.  It 
entered  into  force  only  in  March  2011.In  parallel  to  the  legal  instrument  proposed  in 
concjunction with this Impact Assessment, the Commission proposes also to the Council 
that  the  EU  accedes  to  the  Offshore  Protocol.  Efforts  to  activate  this  advanced  legal 
instrument will need to be stepped up. 

37 For this reason, following maritime accidents in the past the EU moved to adopt specific legislation to 
improve the safety of maritime transport (notably the three so-called maritime safety packages). 

20 

 
                                                 
2.4.4.  Effects of a "do-nothing" approach 

The  assessment  is  that  any  changes  introduced  by  industry  will  focus  on  hardware  and 
standards  and  guidance.  These  can  be  expected  to  bring  down  the  current  risks  and 
therefore  also  reduce  over  time  the  incurred  damages  from  standard  operations. 
However, this improvement will be elective in nature and therefore patchy and suggests 
that  the  necessary  significant  change  in  safety  culture  and  actual  performance  in 
preventing  major  incidents  cannot  be  attained  across  EU  without  an  overhaul  of  best 
practices requirements for operators and regulators.  

The  current  absence  of  risk  assessment  approaches  to  preventive  measures  in  some 
Member States, and failures of risk assessment to deliver permanent risk reduction in the 
North Sea means that flat-lining or increasing major hazard risks as reported by UK and 
Norway will not improve. At the same time, the trends in the industry, as described also 
in  chapter  2,  mean  that  the  focus  of  its  activities  is  gradually  moving  to  operations 
entailing increasing risks. Hence the effect of improvements to company practices will be 
at  least  partly  counterbalanced  by  the  increase  in  riskiness  of  typical/usual  operations. 
The same can be assumed about the efforts of public authorities at improvements of their 
oversight of the industry within the existing regulatory framework. Overall there is little 
confidence that the safety culture of industry, overall, will improve, or even level up to 
the current best standard.  

As  result  of  the  above  considerations,  it  can  be  estimated  that  in  the  baseline  scenario, 
the  range  of  €205–915  million  presented  in  section  2.4.2  may  remain  generally 
representative of the future record of the sector as well if no thorough change processes 
are stimulated by a policy action at least partly driven at EU-level. 

2.5. 

Need for EU action 

The challenge posed by the risk of a large offshore accident requires that state of the art 
practices become the norm throughout the EU and its waters. Such a uniform high level 
of  safety  will  elicit  full  public  confidence  and  can  underpin  EU  efforts  to  ensure  high 
levels of safety, preparedness and response also beyond European borders, both in other 
jurisdictions and in international waters. The baseline and its analysis indicate that action 
is required for preventing, responding to, and coping with major offshore incidents. 

We emphasise in the problem definition section of this chapter that EU has fragmented 
regulatory frameworks and these present an object lesson in the need for concerted action 
at  EU  level.  EU  law  does  not  provide  a  comprehensive  framework  to  ensure  a  level 
playing field and adequate safety and protection of the marine environment and coastal 
communities. A number of examples illustrate why the disparity of approach across the 
EU is problematic and calls for an EU legislative approach to remove the adverse effects. 

i. 

Product safety. As explained throughout this report, product safety legislation 
does  not  apply  to  mobile  installations  which  are  classed  as  ships.  Therefore 
there  are  inconsistent  standards  applying  across  the  EU  between  fixed  and 
mobile units. Further, mobile drilling units well control equipment is beyond 
the scope of IMO codes for such units. Therefore it is only in Member States 
where  national  law  requires  formal  safety  assessments  of  the  major  hazard 
risks  that  due  consideration  is  given  to  safety  critical  equipment  by  the 
regulator 

21 

 
ii. 

iii. 

iv. 

v. 

Safety  and  health  document  (SI  92/91/EC).  The  requirement  for  operators  to 
have a safety and health document is unaccompanied by a requirement for its 
submission  and  appraisal  by  the  national  regulator.  Only  where  a  risk  based 
regime  exists  –  in  the  North  Sea  is  the  formal  risk  assessment  subject  to 
enforcement  by  incorporation  into  the  national  regulatory  and  inspection 
programmes.  Amending  Dir  92/91/EC  to  more  specifically  create  duties  for 
prevention of offshore major hazards is not feasible as we clarify in Annex X 

Environmental liability (ELD 2004) The ELD is out of step with evolved EU 
policy  for  the  common  good  of  EU  maritime  space  as  expressed  in  the  later 
Marine  Strategy  Framework  Directive  2008/56/EC.  The  liability  for  water 
damage  within  Member  states  EEZ  beyond  the  territorial  seas  may  only  be 
extended through legislative action at EU level. We extend the description of 
this problem and the challenges for EU environmental policy in Annex X 

Integration  of  safety  and  environmental  risk  assessment  and  emergency 
response planning. The Seveso Directive is a well proven and regarded model 
for  integrated  protection  of  safety  and  the  environment  resulting  from 
industrial activity. Deepwater Horizon has brought into sharp relief the close 
relationship  between  a  major  safety  accident  and  a  major  accident  to  the 
environment when operating offshore. Our examination of the situation in the 
EU  is  that  some  Member  States  integrate  safety  and  environmental  risk 
assessment  to  a  recognisable  degree,  others  do  not.  And  no  Member  State 
achieves  the  standard  of  integration  of  regulation  of  environment  and  safety, 
or  formal  safety  assessment  and  integrated  emergency  planning  that  is 
provided onshore under the Seveso 2. It is not feasible to extend the directive 
offshore  for  reasons  we  make  clear  in  Annex  X  and  therefore  EU-wide 
legislation is required to raise the bar to onshore levels. 

Transparency National reporting arrangements are notoriously problematic to 
compare  between  countries  and  so  the  relative  levels  of  risk  in  different 
Member  States  is  not  apparent  to  anyone.  The  international  data  available 
from  the  industry  (see  Annex  XII  –  Benchmarking)  suggests  Europe  is 
relatively low down the international league table for safety incidents, and that 
Member States of Europe have different performance standards but at national 
level and higher (eg amongst NSOAF members in the North Sea) this is all but 
impossible  to  analyse.  Only  countries  that  actively  compare  data  at 
considerable  cost  of  refinement  and  factoring  make  available  plausible 
reporting  of  offshore  safety  performance.  The  leading  countries  are  the  UK 
and  Norway  and  both  report  concerns  about  the  flat  or  downward  trends  in 
risk  of  major  accident  hazards.  As  we  report  in  Annex  XIII  it  is  precisely 
because of the investment by these countries in attending to their data that they 
can  interpret  the  onset  of  problems  and  target  their  resources  accordingly. 
Agreement on common data formatting has eluded the best endeavours of the 
leading  regulatory  forums  (NSOAF  and  IRF)  and  it  is  clear  that  EU-level 
action is necessary if this important goal is to be attained. 

Whereas  the  risk  of  a  major  offshore  incident  is  significant  and  can  be  reduced,  EU 
action can contribute to the prevention and remedy of major incidents which could occur 
in  the  EU.  This  will  only  be  achieved  by  effecting  an  EU-wide  change  in  both  the 
industry (e.g. applying best practices, making comprehensive risk assessments, including 
relating  to  the  environment)  and  in  the  regulatory  system  (e.g.  implementing  a  best 

22 

 
regulatory  model  and  oversight  for  joined  up  safety  and  environmental  protection,  and 
achieving  suitable  transparency).  The  action  ought  to  provide,  as  well,  for  better 
emergency  preparedness  and  response,  with  effective  emergency  plans  and  assets  in 
place  both  in  industry  as  well  as  in  Member  States.  This  could  also  include  areas 
bordering  EU  waters,  where  possible  and  appropriate.  In  addition,  the  action  could 
ensure the availability of adequate provisions for recovery and liability, in the event that 
a major offshore incident would ultimately occur. These measures should therefore make 
provisions for environmental liability and compensation.  

All  this  can  only  be  achieved  through  determined  action  by  the  public  authorities  in 
Europe and a strong partnership between all actors involved - EU institutions, Member 
States,  industry,  NGOs  and  other  stakeholders  –  in  line  with  the  principles  of  the  EU's 
Integrated Maritime Policy. The Commission has in its Communication of October 2010 
identified actions to be undertaken in the EU in the interest of increased offshore safety. 
This  Communication  was  welcomed  and  endorsed  by  the  Council38.  The  European 
Parliament  has  issued  in  October  2010  a  resolution  on  EU  action  on  offshore  oil 
activities calling on the Commission to bring forward a comprehensive legal framework 
ensuring  uniformly  high  safety  standards  apply  across  the  EU  and  third  countries  and 
including  proposals  covering  inter  alia  accident  prevention,  disaster  response  and 
liability39. 

The subsidiarity and proportionality questions relate to whether the Member States (and 
industry)  alone  are  sufficiently  positioned  to  address  each  of  these  issues  at  national 
level, and, if not, what EU-wide measures are necessary to achieve the objectives set.  

Subsidiarity considerations 

EU  action  has  been  considered  only  where  it  can  achieve  the  policy  objectives  more 
effectively  than  the  Member  States  or  where  actions  by  Member  States  alone  may  not 
deliver optimal improvements. This proposal uses both the environmental legal base as 
well as the energy one, thus the objectives of both policies need to be fulfilled.  

The regulatory framework governing offshore oil and gas activities is characterised by a 
high  degree  of  fragmentation  along  the  lines  of  national  jurisdictions.  Despite  these 
differences, the offshore regimes in the UK, the Netherlands, Denmark and Norway have 
in common the predominantly goal-setting regulatory approach that is considered world 
class.  However  these  countries  would  acknowledge  they  are  capable  of  improvement 
through making adjustments towards the composite North Sea benchmark.  

In addition, offshore production occurs increasingly in the Mediterranean, the Black and 
the  Baltic  Seas.  Countries  in  some  of  these  marine  regions  have  less  experience  in 
regulating  offshore  operations.  Since  Deepwater  Horizon,  many  oil  producing  Member 
States have been reviewing their offshore systems, but, the responses vary as much as the 
national  regulatory  regimes  and  standards.  Some  have  intensified  inspections;  others 
have restricted operations or developed new designs for emergency response equipment. 
Some others report that their systems are adequate and robust40. Most activity is where 

38 Reference to Council conclusions 
39Resolution on EU action on oil exploration and extraction in Europe adopted on 07 October 2010. 
40 Results from the DRILLEX Questionnaire sent to OSPAR contracting parties. 

23 

 
                                                 
the  regimes  are  already  most  advanced,  yet  both  the  likelihood  and  consequences  of 
major offshore incidents are unacceptably high throughout the EU.  

Overall, a failure to take action at EU level will exacerbate the fragmentation in Europe 
of regimes and national policies and deprive Member States of the most suitable means 
to reduce risks of offshore major incidents in a reasonable time frame.  

In  terms  of  preventive  measures,  the  desired  situation  is  for  effective  and  reliable 
practices to be applied consistently by industry. The global nature of the industry speaks 
in favour of extending a state-of-the-art risk control model, already practised in parts of 
the EU, to all EU waters. Furthermore, severe incidents in one Member State, if resulting 
in an oil spill, will almost inevitably impact on other Member State(s).41 Considering the 
limitations  of  a  global  solution  (see  Section  2.4.5.),  an  EU-level  blueprint  for  state-of-
the-art  industry  practice  and  regulation  seems  the  best  means  to  achieve  the  desired 
situation.  The  EU's  involvement  could  also  bring  a  solution  to  hitherto  insoluble 
difficulties  of  making  meaningful  comparisons of industry  performance,  and increasing 
the sharing of intelligence and incident data. 

In  terms  of  response,  the  costs  and  consequences  are  high  as  is  the  risk  of  a  large 
transboundary  oil  spill  affecting  adjacent  countries.  Industry  has  put  in  place 
collaborative measures for dealing with major incident response, but does not control all 
of  the  necessary  resources.  Primary  response  would  fall  to  the  individual  civil 
contingency  measures  of  each  Member  State  but  these  would  be  overwhelmed  in  the 
event of an incident of the scale of Deepwater Horizon or Piper Alpha. Encouragingly, it 
is  considered  that  sharing  of  resources  and  expertise  will  probably  be  relied  primarily 
amongst  Member  States.  However,  more  formal  convergence  of  emergency  response 
plans,  environmental  sensitivity  reports  and  industrial  inventories  would  ensure  the 
necessary level of compatibility and effectiveness of action in a real emergency. The EU 
is best placed to promote a more joined up and coherent approach through its capacity for 
coordination, making best use of existing EU assets, and leading on the development of 
common information formats and tools. 

Coordination  and  alignment  of  national  practices  are  desirable  features  both  in 
prevention, response, and liability in the event of a significant incident. Increasing safety 
can  lead  the  sector  to  minimise  its  harmful  impacts,  while  continuing  its  growth. 
Maintaining  a  healthy  and  safe  offshore  sector  contributes  to  energy  supply  security, 
environmental protection, jobs and economic development in the regions and to growth, 
in  line  with  the  principles  of  Europe  2020.  These  features  are  also  the  basis  for  the 
development  of  the  internal  market,  which  is  a  fundamental  driving  force  of  European 
integration in the energy area, as it is in other sectors. This market integration must not 
occur at the expense of lowering safety standards. In addition, as many offshore oil and 
gas companies are active in more than one EU jurisdictions, an alignment of regulatory 
practices  would  lead  to  a  reduction  of  transaction  costs.  It  is  recognised  that  reduced 
transaction  costs  may  not  be  game-changing  in  relative  terms,  but  the  increased 
efficiency  of  regulation  could  nevertheless  facilitate  compliance  and  give  a  valuable 
boost to the European safety technology market. 

Being  able  to  speak  with  one  voice  and  clearly  demonstrate  the  EU's  offshore  safety 
standards  through  one  EU-wide  regime  would  also  improve  the  EU's  position  in 

41 Such trans-boundary spills may of course originate both in EU and non-EU marine areas.  

24 

 
                                                 
international  discussion  on  offshore  safety  improvements  and  on  marine  environment 
protection. The conclusions by the Council and the resolutions by the Parliament agree 
on the value of having the EU and its Member States play a prominent role in promoting 
global  offshore  safety  awareness 
initiatives  and  regional 
cooperation.  A  good  example  is  the  Mediterranean  region,  where,  adoption  of  an  EU 
wide  legal  instrument  in  connection  with  the  ratification  by  the  EU  of  the  Offshore 
Protocol,  will  confirm  the  EU's  active  role  in  the  region  and  is  likely  to  stimulate 
ratification  by  other  Parties  of  the  Barcelona  Convention  and  thus  facilitate  and 
accelerate practical application of the provisions of the Protocol. A common EU model 
would strengthen the role of the EU in safety diplomacy efforts that aim to manage risks 
from adjacent regions and, globally, from mobile industry assets such as drilling rigs.  

international 

through 

Proportionality considerations 

The proportionality consideration dictates that EU action be proposed only where the EU 
can  achieve  the  objective  more  cost  effectively  than  the  Member  States  (e.g. 
environmental liability, EU-wide practices, committees). Where administrative costs are 
involved  (e.g.  achieving  increased  transparency),  care  has  to  be  taken  to  seek  the  most 
cost-effective solutions between new mechanisms and improving existing national ones. 
Whenever possible, the aim is to improve the implementation of existing EU legislation 
through  non-legislative  measures  (e.g.  guidelines,  committees)  and  only  where  this  is 
deemed insufficient, are amendments or new legislation proposed. Industry's potential for 
self  regulation  (e.g.  response  technology)  and  international  options  (e.g.  civil  liability) 
are also duly taken into account. 

In  achieving  the  requisite  balance  between  the  objectives  and  the  means  proposed  to 
achieve them this analysis takes into account: 

•  The  costs  realised  by  the  Deepwater  Horizon  incident  are  estimated  by  BP  to  be  in 
excess of $40bn; costs of a similar event in EU waters could be similar or even higher 
•  Incidents  of  the  magnitude  of  Deepwater  Horizon  occur  in  the  offshore  drilling  and 
production  industry  at  a  frequency  of  decades  which  is  high  for  extreme  major 
accident hazards 

•  The  value  of  the  EU  offshore  sector  is  very  high  in  terms  of  national  economies 

(revenues and employment) and its contribution to security of supply 

•  The offshore sector generates exceptional financial return for the operating companies 

involved 

•  The  public  has  developed  an  aversion  to  further  major  incidents  risks,  which  is 

heightened by the recent nuclear power plant incident in Japan 

In  the  next  part,  we  describe  the  options  that  may  be  adopted  to  address  the  whole 
problem of offshore risk in EU waters. The cost of the options is modest in comparison 
to the benefits they will secure and no adverse impact is foreseen on the retail market or 
to SME's. We consider that the proposal comprises enabling measures that would assure 
the  future  of  the  industry  in  the  EU  and  thereby  the  economic  wellbeing  of  Member 
States  that  have  offshore  petroleum  reserves,  and  the  security  of  indigenous  supply  of 
energy in the EU more generally. 

Existing EU law provisions in the area of the proposal 

25 

 
EU has no offshore oil and gas sector specific legislation; however there is broader EU 
legislation that applies to certain aspects of the offshore sector, often in a partial manner. 
This proposal complements the following pieces of EU legislation: 

i. 

ii. 

Environmental  liability.  Environmental  Liability  Directive  (ELD)  2004/35/CE 
addresses liability for damages to the environment that can result from an accident or 
other critical events in offshore activities, with the main aim of remediation towards 
the  innocent  affected.  No  consideration  of  intent  or  negligence  is  necessary  to 
establish  liability  in  relation  to  offshore  petroleum.  Because  the  ELD  preceded  the 
Marine Strategy Framework Directive (2008/56/EC), its application regarding water 
damage is limited to waters within the territorial seas – 20 km from the shore. This 
proposal aims to update this definition of waters by the more recent one, established 
in  the  MSFD,  covering  also  marine  waters  under  the  jurisdiction  of  the  Member 
States. 

Establishing environmental liability relies on jurisprudence from the Court of Justice 
of the EU42 instituting that oil spilled in the sea becomes waste under the scope of the 
Waste  Framework  Directive  2008/98/EC.  Consequently, the  operator is regarded  as 
the  producer  or  holder  of  waste  and  would,  in  accordance  with  the  polluter  pays 
principle, bear the costs of waste management. Liability extends to parent companies 
which are not able to abrogate liability towards subcontractors.43 

installations)  are 

Environmental  Impact  Assessment:  Offshore  petroleum  production  activities  (i.e. 
the  scope  of  Directive  2009/31/EC  on 
long  duration 
environmental  impact  assessments.  It  is,  however,  discretionary  for  some  drilling 
operations  –  e.g.  for  transient  exploration  well  projects  such  as  the  Deepwater 
Horizon in the US.  

in 

iii.  Health and safety of workers at work: - Provisions containing minimum requirements 
for  health  and  safety  of  workers  across  different  sectors  are  laid  down  in  the 
Framework Directive 89/391/EEC, its relevant individual Directives (e.g. Directives 
89/656/EEC  on  personal  protective  equipment,  2002/44/EC  on  vibrations, 
2003/10/EC on noise, 2009/104/EC on work equipment etc.) and the sector-specific 
individual  Directive  92/91/EEC  that  applies  to  onshore  and  offshore  drilling.  The 
main aim of this legislation is the prevention of all risks for workers, both major and 
minor. Directive 92/91/EC contains further minimum requirements applicable to the 
off-shore  sector  as  regards  risk  assessment,  protection  from  fire  and  explosions, 
escape and rescue, etc. The measures in this proposal go beyond Directive 92/91/EC 
in  requiring  a)  measures  to  include  environmental  assessment;  and  b)  for  the  risk 
assessments and control measures to be incorporated into a report to be submitted to 
the  regulator  for  consent;  c)  for  well  operations  to  be  notified  in  advance  to  the 
regulator,  and  d)  for  a  scheme  of  independent  verification  of  critical  risk  control 
elements. 

42  ECJ  case  C-188/07  (Commune  de  Mesquer  v  Total  France  SA  and  Total  International  Ltd.)  provides 
important jurisprudence. The ECJ in the abovementioned case concerning maritime transport (Erika tanker 
accident)  came  to  the  conclusion  that  oil  accidentally  spilled  at  sea  following  a  shipwreck,  mixed  with 
water and sediment and drifting along or being washed at the coast of a Member States constitutes waste 
within the meaning of the Waste Framework Directive. 
43 See for instance the Van de Walle case (C-1/03) with Texaco being considered as holder of waste or 
Mesquer case (C-187/03) with Total being potential holder of waste. 

26 

 
                                                 
iv.  Major hazards: The Seveso Directive 96/82/EC does not apply to the offshore sector 
but certain aspects of it are relevant also for offshore and therefore included in this 
proposal.  Among  such  relevant  aspects  are  requirement  for  industry  practices  in 
major  hazards  risk  control,  joint  regulation  of  safety  and  environment  of  major 
hazard  sites,  and  emergency  preparedness.  Others,  such  as  land  use  planning 
precautions  are  not  relevant  offshore.  This  proposal  goes  beyond  Seveso  in  a) 
requiring  consent  by  the  regulator  of  the  operator's  major  hazards  report,  b)  in 
strengthening provisions for verifying technical and financial capability at licensing 
stages,  and  c)  in  provisions  for  evacuation  escape  and  rescue  of  a  marooned 
workforce.  

v.  Granting  hydrocarbon  prospection,  exploration  and  production  authorisations: 
Directive 94/22/EC - . This Directive introduces the requirement to use technical and 
financial  capacity  of  an  applicant  as  selection  criteria  in  procurement  process.  This 
proposal  strengthens  these  considerations  of  technical  and  financial  capability  of 
applicants for licenses to ensure that the environmental and safety risks of operating 
in the licensed area are fully taken into account in addition to the ability to exploit the 
licensed  area  for  hydrocarbons.  It  complements  also  Dir  94/22/EC  by  introducing 
provisions  applicable  to  the  later  stages  (drilling  consents,  well  notifications)  of 
offshore exploitation that are outside the scope of 94/22/EC. 

vi. 

Emergency  response:  The  Community  Civil  Protection  Mechanism  Directive 
2001/792/EC provides for support, on request, in the event of a major emergency and 
facilitates  improved  co-ordination  of  assistance  intervention.  It  covers  both  civil 
protection  and  marine  pollution  and  allows  responding  to  any  major  disaster  inside 
and  outside  the  EU.  To  support  the  Directive,  the  Commission  operates  the 
Monitoring  and  Information  Centre  (MIC)  to  coordinate  requests  and  offers  for 
assistance from EU27, Croatia and the EEA countries. The MIC works closely with 
the European Maritime Safety Agency44 (EMSA) in this regard. EMSA is foreseen to 
be  authorised  to  support  offshore  oil  and  gas  sector  emergencies,  however,  lacks 
resources  to  act  on  the  prevention.  The  proposal  aims  to  complement  the  work  of 
MIC  by  facilitating  various  aspects  of  cross  border  response  including  the 
governmental and industry asset inventories.  

Consistency with other policies and objectives of the Union 
This  regulation  is  consistent  with  the  Energy  Strategy  for  202045,  viz  Priority  3,  the 
element for safe, secure and affordable energy in Europe. The second action under this 
priority is for the enhancement of offshore safety and security frameworks. It says: "The 
safety  conditions  of  offshore  oil  and  gas  extraction  are  being  reviewed  by  the 
Commission in the light of the Deepwater Horizon accident, with the aim of introducing 
stringent measures from prevention to response and liability issues which will guarantee 
the highest level of protection throughout the EU and the rest of the world." This impact 
assessment and regulatory proposal is pursuant to that strategy.  

44 EMSA was established in the aftermath of the Erika (1999) and Prestige (2002) tanker disasters for the 
purpose  of  ensuring  a  high,  uniform  and  effective  level  of  safety,  security,  prevention  of  pollution  and 
response to pollution at sea, irrespective of source. 

45 SEC(2010) 1346: Energy 2020, A strategy for competitive, sustainable and secure energy. 

27 

 
                                                 
The joint communiqué of the current and two future Presidencies of the Union also make 
offshore oil and gas safety a policy priority, with Denmark indicating that it expects new 
legislation  to  be  adopted  during  its  Presidency.  This  proposal  aims  to  align  with  that 
timetable. 

This  regulation  is  also  consistent  with  EU's  environmental  policy  and  its  main  tenets 
such as pollution prevention, control and the polluter pays and precautionary principles. 
It  is  fully  coherent  with  marine  environment  policy,  notably  the  goal  of  achieving  by 
2020  the  Good  Environmental  Status  of  the  marine  environment  (Marine  Strategy 
Framework Directive 2008/56/EC, 'MSFD'). The MSFD requires to apply an ecosystem-
based  approach  to  the  management  of  human  activities,  ensuring  that  the  collective 
pressure of such activities is kept within levels compatible with the achievement of good 
environmental  status.  All  human  activities  having  a  potential  impact  on  the  marine 
environment,  including  offshore  activities,  need  to  contribute  to  reducing  the  current 
pressures.  The  MSFD  specifically  requires  protecting  and  preserving  the  marine 
environment, to prevent its deterioration, and to prevent and reduce inputs in the marine 
environment,  with  a  view  to  phasing  out  pollution,  so  as  to  ensure  that  there  are  no 
significant impacts on or risks to marine biodiversity, marine ecosystems, human health 
or  legitimate  uses  of  the  sea.  The  new  legislative  initiative  of  the  EU  in  relation  to 
offshore activities has the objective to reduce the occurrence of major accidents related 
to  offshore  oil  and  gas  activities  and  to  limit  their  consequences,  thus  increasing  the 
protection of the marine environment and coastal economies against pollution. Therefore, 
it is not only compatible with, but in reality contributes directly to the goal of achieving 
by 2020 the Good Environmental Status of the marine environment under the  MSFD. 

The  Environmental  Liability  Directive  (2004)  was  adopted  after  the  entry  into  force  of 
the  Waste  Framework  Directive  (2000),  which  applies  in  coastal  and  territorial  waters, 
but  before  the  adoption  of  the  Marine  Strategy  Framework  Directive  (2008),  which 
extended environmental protection to all marine waters under sovereignty or jurisdiction 
of  EU  Member  States.  Deepwater  Horizon  illustrates  a  problem  related  to  an  overall 
fragmented  legislative  framework  in  the  EU  environmental  framework  For  example  in 
terms of geographical scope the 6th Environmental Action Plan (2002-2010), adopted by 
co-decision by Parliament and Council, requested a thematic strategy for the protection 
of  European  seas,  having  identified  a  gap  in  the  common  goods  to  be  protected  at  EU 
level.  This  request  led  to  a  Commission  proposal  for  MSFD  adopted  in  2008.  To  the 
extent  that  EU  policy  evolves  in  accordance  with  the  directions  by  Parliament  and 
Council,  the  question  is  now  raised  whether  it  is  appropriate  to  adjust  already  existing 
instruments  (such  as  the  ELD)  to  such  a  gradual  policy  evolution,  or  whether  it  is 
preferable to keep them in their original form, irrespective of overall progress in policy.  

The  status  quo  would  perpetuate  a  framework  where  some  of  the  consequences  of 
accidents  on  marine  waters  from  operations  are  not  adequately  internalised  (which  is  a 
major purpose of the environmental liability framework), in accordance with the polluter 
pays principle. Therefore this legislative proposal presents an opportunity to ensure the 
sector in charge of potential damage to the common goods identified in current EU law 
(marine waters) would take expressly enhanced responsibility. In other words, the main 
consequence of any geographical extension of the ELD to water damage at sea is above 
all a matter of prevention, which is coherent with the overall logic of intervention on this 
issue, and would in fact close a gap in an otherwise comprehensive consistent structure 
for environmental protection in the EU.  

28 

 
 
Maintaining  a  healthy  and  safe  offshore  sector  contributes  to  energy  supply  security, 
environmental protection, jobs and economic development in the regions and to growth, 
in line with the principles of Europe 2020.  

The  legislative  proposal  is  also  in  line  with  internal  market  considerations  insofar  as  it 
brings  about  convergence  and  a  certain  reduction  of  transaction  costs  born  by  industry 
which  currently  operates  under  highly  diverse  and  fragmented  national  jurisdictions. 
Firstly it aims above all to level up EU offshore regulation to the best EU practices.  In 
terms  of  the  industry,  this  is  a  welcome  manoeuvre  because  the  currently  fragmented 
regulatory  framework  in  the  EU  has  start-up  costs  for  operators  and  suppliers  moving 
between  different  EU  countries.  And  because  the  proposal  does  not  aim  for  new 
regulatory  systems  but  extends  well  understood  best  practice  requirements  from  the 
North Sea (mainly) the market uncertainties that arose following Deepwater Horizon will 
be assuaged.  

Secondly, in lowering risk of major offshore events and associated public aversion to the 
sector, the proposal de facto enhances continuity of production and, as we illustrate in the 
impact assessments in chapter 5 and annexes I and IV, reduces financial exposure of the 
EU when  expressed in terms of annualised  costs of the current level of risk of a major 
incident in the EU (up to €915m/year). 

Thirdly the proposal addresses, opportunistically, unsustainable anomalies in the supply 
and use of equipment for offshore installations that follow from the current classification 
of  mobile  rigs  as  ships  –  which  they  clearly  are  not  when  stationed  and  engaged  in 
drilling  and/or  production.  This  move  is  especially  welcomed  by  regulators  and 
suppliers.  

3. 

OBJECTIVES & MEASURES 

3.1. 

General objectives 

Given the definition of the problem and its drivers identified in the preceding chapter, an 
EU initiative would logically follow two general objectives stemming from the relevant 
competences  of  the  EU  as  described  in  the  Treaty,  in  the  EU  acquis  or  in  agreed 
European policies: 

1.  To prevent a major incident from occurring in EU offshore oil and gas exploitation 

(relating, in particular, to major accident hazards (MAH)). 

2.  To  enable  the  EU  to  deal  effectively  with  a  major  emergency,  should  preventive 

measures fail. 

3.2. 

Specific objectives 

The problem characterisation and baseline analysis presented in the preceding chapter, as 
well as consultation with stakeholders indicate that the general objectives set above can 
be  met  only  by  a  comprehensive  initiative  which  will  address  issues  arising  along  the 
whole value chain of the sector and which will target the specific drivers underlying the 
identified problem.  

29 

 
  
In that spirit, the two general objectives cited above can be developed into the following 
set of specific objectives for EU action: 

1.  Ensure  a  consistent  use  of  best  practices  for  major  hazards  control  by  oil  and  gas 

industry offshore operations potentially affecting EU waters or shores; 

2.  Implement  best  regulatory  practices  in  all  European  jurisdictions  with  offshore  oil 

and gas activities; 

3.  Strengthen  EU's  preparedness  and  response  capacity  to  deal  with  emergencies 

potentially affecting EU citizens, economy or environment; 

4.  Improve and clarify existing EU liability and compensation provisions.  

These specific objectives build on the Commission's position taken in its Communication 
of October 2010 through subsequent consultations and analyses. 

4. 

POLICY OPTIONS 

To recap, the reaching the objectives identified in Chapter 3 would bring solutions to the 
3-fold  problem  defined  in  Chapter  2.1.  The  problem  itself  is  influenced  by  the  drivers 
listed in Table 1 and described briefly in the preceding text and in more detail in Annex 
III. In Commission research and analysis and through consultation we identify a number 
of  actions  (14)  which  we  refer  to  as  measures  which,  if  all  implemented  through  law, 
would represent the highest level of ambition for dispensing with the problem of offshore 
major hazards prevention. However the highest level of ambition may not be justified, so 
policy  options  have  been  developed  which  assemble  the  measures  in  different 
combinations and means of implementation. These options are described in further detail 
in the following paragraphs. 

Table 2: Links between problem drivers and Measures 

30 

 
 
4.1. 

Overview of the policy options  

The options identified differ by the degree of practical change to the existing operational 
models  of  regulators  and  industry  and  by  the  level  of  policy  ambition  and  cost  on 
industry and Member States as follows. 

Box 2: OVERVIEW OF THE POLICY OPTIONS 

Option  0:  The  Commission  taking  no  role  in  offshore  safety  and  environmental 
protection ("Baseline option") 

Option  1:  Levelling  all  EU  regions  up  to  the  existing  North  Sea  practice  ("North  Sea 
basic model") 

Option 1+: Option 1 combined with some improvements in existing EU law addressing 
inconsistencies/lack of clarity ("North Sea + model"); 

Option 2: Comprehensive offshore reform raising all EU (including the North Sea) up to 
what  constitutes  in  current  expert  consensus  possible  best  practise;  ("EU  best  practice 
model") 

Option  3:  Complementing  the  comprehensive  offshore  reform  through  institutional 
structures/instruments at EU level ("EU Agency model") 

Each policy option consists of a package of measures which, as we say above, will act 
upon the drivers of the problem. In the following section we describe the policy options 
and  the  package  of  measures  they  comprise.  We  allude  to  the  form  of  implementation 
necessary for each option (guidance/law/etc) in the text, and summarise this in Table 3 at 
the  end  of  the  chapter.  The  detailed  analysis  supporting  the  different  ways  of 
implementing each option (in effect sub options) is in Annex XI. 

4.2. 

Description of the policy options  

4.2.1.  Option 0 

Option 0 is the baseline option which leaves the status quo to evolve. We describe this 
situation in section 2.4.3 'Foreseen evolution of the baseline' as elective and patchy and 
of little overall impact on the problem drivers, so justifying EU action. 

From  this  starting  point,  policy  options  have  a  cumulative  impact  on  the  drivers  and 
hence on delivery of the specific objectives. The full suite of measures is listed in Table 
2. The rest of this section describes how measures may be progressively implemented to 
achieve higher levels of policy options. 

4.2.2.  Option 1 

Option  1  (North  Sea  Basic) would aim to bring all EU Member  States to  the level  of 
prevention  and  emergency  preparedness  currently  in  place  in  the  North  Sea  region, 
bearing  in  mind  that  the  region's  risk-based  regulatory  framework  is  considered  at 
present amongst the very best in the world. As such, Option 1 would eliminate regional 
differences  currently  present  in  the  EU  but  would  not  remove  any  of  the  current 
disconformities  with  absolute  best  practice  between  North  Sea  Member  States  and  so 

31 

 
would not achieve a higher common denominator in that region nor in the EU than exists 
today. 

This option would entail the following measures which would require to be implemented 
through law. Annex XI explains at length the rationale behind the legal instrument 
for  implementing  this  option.  The  numbering  refers  to  the  number  assigned  to  the 
measures on the right hand side of Table 2 above. 

Submission of formal safety assessments for acceptance by the regulator prior to 

(3) 
operations with major hazards potential  

This measure reflects existing practices in some of the European jurisdictions considered 
as most advanced, namely in the North Sea region. It requires from any licensed operator 
a  coherent  exposition  of  its  risk  control  measures,  presented  in  a  (up-to-date)  major 
hazards  report  (MHR),  which  has  already  been  briefly  introduced  and  described  in  the 
text  box  in  chapter  2.  The  MHR  establishes  the  most  suitable  means  for  preventing  a 
major  incident  from  occurring  and,  if  it  nonetheless  occurs,  providing  for  the  survival, 
evacuation  and  rescue  of  workers  as  already  required  under  Directive  92/91/EEC,  but 
goes further in requiring submission to and acceptance by the regulator46. This creates a 
goal-setting,  as  opposed  to  prescriptive,  regulatory  regime  where  operators  are  not 
merely  following  a  prescribed  set  of  instructions  or  requirements.  They  would  be 
compelled to focus on actively preventing the occurrence of a major accident (including 
well control, structural integrity of installations etc.) and limit the consequences and the 
resulting (major) impacts for safety and health of workers; they would ideally be obliged 
to have such a document/report, specific to each site/installation, reviewed for suitability 
and adequacy by the regulatory authorities before they engage in specific exploration or 
production activities (e.g. drilling) which carry particular risks. Such a provision would 
ensure  that  the  relationship  between  the  operator  and  the  expert  regulator  is  centred 
around  the  major  hazard  risks  and  steers  the  operator  to  the  use  of  best  available 
practices  and  state-of-the-art  technology  in  order  to  reduce  the  risks  as  much  as 
reasonably possible. 

Given the obvious attraction, at face value, of amending EC 92/91 we have provided a 
detailed explanation of the need for a separate legal instrument in Annex X, in addition 
to the comprehensive assessment of implementing options in Annex XI. 

to 

respondents 

the  public  consultation  and  members  of 

All 
regular 
industry/regulator/Commission  liaison  meetings  that  have  continued  through  the  past 
year  join  with  the  European  Parliament  in  supporting  this  measure.  Many  accept  this 
measure  as  global  best  practice.  Like  the  Parliament,  many  responders  urge  the  formal 
risk  assessment  document  (which  many  adopt  as  shorthand  the  UK  'safety  case')  be 

the 

46  Acceptance  of  the  MHR  means  that  the  regulator  receives  the  major  hazards  report  from  the  operator 
and undertakes a suitable level of expert verification of the report to establish whether it has objections to 
the measures described, which require modifications to be made and incorporated into a revised report. At 
the  conclusion  of  this  process  the  regulator  will  communicate  the  outcome  of  its  review  to  the  operator 
which will either be that the report is acceptable or that it is not. The indication of acceptability could be in 
the form of a statutory acceptance of the report, without which the operator may not proceed. Equally, the 
written indication could take the form that no further dialogue is required. In all cases the MHR, in its final 
form,  will  be  a  basis  for  targeted  inspection  by  the  regulator,  during  the  lifetime  of  the  MHR.  This  is 
usually about 5 years, then it needs to be reviewed by the operator who will need to show any necessary 
changes  to  the  regulator.  Should  the  installation  undergo  major  modification,  the  operator  reviews  and 
where necessary revises the MHR, irrespective of the age of the current MHR. 

32 

 
                                                 
extended  to  incorporate  environmental  impact  assessment  (see  Measure  4  which  is 
implemented  within  Option  2)  and  include  installation  specific  emergency  response. 
Industry  and  regulator  contributors  to  the  Commission's  analysis  have  been  quite  clear 
that  this  model  should  be  applied  universally  across  the  EU,  and  that  an  entirely  new 
model would destabilise the regimes in the currently best regulated Member States. 

(2) 

Establishing regular inspections and a penalties regime 

The aim behind this measure is the attainment of consistent high standards of assurance 
(through inspections, sanctions, etc.) that adequate controls are in place by the industry to 
prevent a major offshore incident in EU waters. It addresses the current concern that the 
thoroughness  of  the  assessment  of  safety  reports,  site  inspection  and  enforcement  of 
defects  varies  between  Member  States.  In  addition,  the  attainment  of  consistently  high 
standards  in  major  incident  prevention  across  the  EU  depends  partly  upon  a  consistent 
focus  by  EU  regulators  on  the  corresponding  control  measures.  Where  regulatory 
inspection  focuses  on  occupational  safety  and  health  factors47,  which  are  more  easily 
inspected  without  a  concomitant  interest  in  the  more  complex  major  hazards 
arrangements48,  industry  focuses  its  attention  accordingly.  Finally,  the  detection  of 
problems  via  inspection  -  ideally  based  on  the  submitted  major  hazards  report  –  see 
measure  (3)  -  would  ideally  be  complemented by follow-up investigation by regulators 
where  necessary  and,  in  all  justified  cases,  by  sufficiently  discouraging  sanctions.  A 
number  of  existing  regimes  can  serve  as  best  practice  examples  -  both  in  EU  and 
elsewhere (for example Norway, Australia, Canada and Brazil). This measure has been 
defined with input from Member States regulatory authorities in both the North Sea area 
and  some  of  the  other  Member  States  keen  on  reinforcing  their  inspection  capacities 
using the North Sea experience as inspiration. 

This measure is universally supported in the public consultation, and by the Parliament's 
position. The great majority of responders urge a goal setting, risk based regime focusing 
on  preventing  major  hazard  incidents,  and  avoiding  prescription.  Public  authorities, 
citizens  and  NGO's  stress  the  importance  of  expertise  and  adequacy  of  funding  for 
regulators  for  tackling  inadequate  safety  culture  of  the  industry,  and  believe  regulators 
should be independent of licensing and commercial sponsorship by governments 

4.2.3.  Option 1+  

Option  1+  (North  Sea  plus)  begins  to  act  also  on  North  Sea  Member  States  and 
therefore  takes  the  level  of  industry  and  regulatory  performance  to  above  that  of  the 
current North  Sea  baseline.  However, it does so only by reinforcing provisions already 
available in existing EU legislation and steering clear of proposing new legislation.  

This Option would add to the measures of Option 1 the following ones (with numbering 
following the right hand side of Table 2) 

47 For example in the degree of automation of lifting heavy objects, washroom hygiene, wearing of suitable 
personal protective equipment, and prevention of slips, trips and falls from height 
48 For example in the maintenance of safety integrity levels that depend on the interaction of a number of 
independent factors; and in the management of change where original design intent of safety systems may 
be infringed. Inspection may be complex and based on a systematic audit approach.  

33 

 
                                                 
(1) 

Detailed verification of the technical capacity of potential operator 

For option 1+ this first layer of action that would be implemented would be pursued at 
EU level only through the soft-law means of guidelines to Directive 94/22/EC, reflecting 
the  reality  that  the  degree  to  which  national  authorities  in  the  North  Sea  region  give 
effect to the corresponding provisions of Directive 94/22/EC differs at the moment 

(12) 
liability 

Clarifying  the  applicability  of  waste  legislation  in  the  scope  of  environmental 

Oil  spills  qualify  as  waste  for  the  purpose  of  EU  waste  law,  with  a  range  of  legal 
consequences as to the responsibilities of operators. This important legal finding, which 
also applies to oil spills from offshore installations, was upheld in a landmark ruling of 
the European Court of Justice. Since it is not explicit in legislation, it would benefit from 
adequate  visibility,  as  a  matter  of  clarity.  This  clarification  could  be  included  in  a 
Frequently  Asked  Questions  document  on  Directive  2008/98/EC  on  waste  (Waste 
Framework  Directive),  which  is  under  preparation  by  DG  Environment  and  will  be 
published by the end of October 2011. 

 (10) 

Preparedness for effective emergency response to major offshore accidents 

This  part  of  option  1+  establishes  the  basis  of  emergency  preparedness  for  Member 
States  through  soft-law  instruments,  this  option  in  effect  sets  a  planning  template  for 
national  emergency  response  plans  -  such  that  plans  can  be  shared  and  resources 
allocated on a collaborative basis between MS in the same region, but also to open up the 
potential for helping other regions combat extreme emergencies. This model is largely in 
place in the North Sea region.  

(11) 

Ensuring cross-border availability and compatibility of intervention assets 

Under option 1+ and  by means of soft-law instruments, this option motivates Member 
States to develop interoperable assets for sharing across boundaries when it is required to 
lend assistance to other MS emergency responses. As a natural corollary to this measure, 
Member  States  would  collate  industry  inventories  and  stimulate  interoperability  of 
industry  and  national  assets,  which  then  opens  up  the  whole  of  the  EU  to  transferring 
equipment and expertise should this be necessary to bring a major incident under control. 

(5) 

Extending EU practices to overseas operations 

The third layer of this option is in extending, formally, EU efforts overseas. This would 
be both in the medium of securing agreements on good practice standards e.g. with IMO, 
neighbouring  states,  and  the  governments  of  IRF  countries,  and  in  securing  voluntary 
agreements with EU based companies to apply, as far as is feasible, the modus operandi 
of their EU operations to their activities outside the Union. 

4.2.4.  Option 2 

Option  2  (EU  best  practice  model)  seeks  more  profound  changes  even  to  the  current 
practices in the North Sea. It does not eschew new EU legislation and therefore can also 
integrate  exemplary  and  proven  practices  or  approaches  developed  in  individual 

34 

 
 
jurisdictions  (mainly  again  in  the  North  Sea  region)  independently  of  existing  EU 
legislation. 

Lying at the heart of option 2 is a best practices model for industry and regulators that 
tackles  industry  culture,  reliability  of  systems,  and  transparency.  Hence,  this  first  layer 
comprises  an  industry  best  practices  model  that  would  be  adopted  and  supported  by 
independent verification.  

(4) 
management model for EU offshore  

Extension of formal safety assessments in view of creating a comprehensive risk 

Under  this  measure,  environmental  risk  assessments  and  emergency  plans  would  be 
incorporated in the major hazard report (MHR). The purpose is to ensure that individual 
companies and the industry as a whole own and consistently follow operational models 
that  allow  them  to  manage  the  full  spectrum  of  risks  from  their  activities  to  a  higher 
degree of control than at present.  

First  and  foremost,  this  means  ensuring  that  all  operators  incorporate  their  policy  for 
major  hazard  prevention  in  their  corporate  policy  statement,  and  makes  the  necessary 
organisational  and  procedural  adjustments  to  bring  this  policy  into  effect.  Setting  these 
matters  into  a  corporate  policy  statement  would  begin  the  attainment  of  the  desirable 
safety culture that has been called for following the various investigations following the 
Deepwater Horizon disaster and reduce the likelihood of catastrophic events. In addition, 
the assessments carried out by authoritative regulators following the Deepwater Horizon, 
and by the Commission prior to publishing its 2010 Communication all conclude on the 
need  to  address  key  issues  such  as  maintenance  of  well  integrity,  reliable  decision 
making,  management  of  major  hazard  activities,  competency  of  key  post  holders,  and 
risk  assessment.  Therefore  we  see  this  measure  also  establishing  the  priorities  for 
collaboration  by  industry  and  regulators  on  key  operational  rules  and  standards  which 
underpin the stronger safety culture.  

Like the EP, the  great majority of respondents either urge the integration of safety and 
environment  risk  assessment,  or  refer  to  the  joined  approach  as  self  evidently  obvious. 
Many  regulators,  citizens,  and  non-operator  industry  respondents  identify  inadequate 
safety culture of industry as the primary target for more stringent policy statements and 
associated  implementing  arrangements  by  operators,  supported  by  rigorous  targeting  of 
major  hazard  risk  controls  and  management  systems  by  the  regulator.  Some  (NGO's) 
suggest  extending  the  application  of  the  Seveso  2  Directive  to  offshore  oil  and  gas. 
Scrupulous  third  party  verification  with  access  to  the  regulator  by  the  verifier,  and 
protection  of  whistle  blowers  are  cited  by  some  respondents  as  necessary  indicators  of 
improved safety culture. 

The EU has since 1996 had a model – Seveso 2 - for integrating the regulation of safety 
and  environmental  protection  and  emergency  response  from  major  hazard  industries 
onshore.  

The priority areas for attention by the industry would include environment damage and 
limiting  escalation  within  the  formal  risk  assessment  in  the  major  hazards  report,  the 
scope of which would be extended compared to Options 1 and 1+, integrating safety and 
environment offshore along the Seveso model, though without bringing the sector under 
the  scope  of  the  Seveso  legislation  itself  which  applies  to  a  wide  range  of  onshore 
industries with different safety needs, e.g. land use planning. It is reasonable to imagine 

35 

 
that Seveso 2 may be applied to the offshore oil and gas sector, removing the need for a 
separate legal instrument. This is ultimately not a feasible option but because there is a 
body of  support for extending Seveso 2 we provide a detailed explanatory note in Annex 
X (supplementing the review of the implementing measures for this option in Annex XI). 

Apart  from  ensuring  that  industry  applies  best  practices  for  the  prevention  of  major 
accidents, it is equally important that a sound regulatory system exists in Member States. 
The following measures are therefore also required under policy option 2 to ensure that 
the industry is subject to a regulatory model that upholds the principles of state-of-the-art 
operations across the EU. 

(6) 

Establishing a Competent Authority in each jurisdiction 

In  order  to  achieve  appropriate  balance  between  avoiding  an  incident  and  limiting  its 
consequences,  it  is  essential  that  a  Competent  Authority49,  i.e.  the  regulator  and  other 
authorities working in the area of oil and gas activities in a given jurisdiction, plan and 
execute  their  activities  consistent  with  recognised  best  practices.  This  measure  would 
ensure that Member States establish such Competent Authorities for the oversight of oil 
and  gas  activities  in  their  area  of  jurisdiction,  with  certain  minimum  characteristics, 
which may include: 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

Absence  of  perceived  or  actual  conflicts  of  interest  between  licensing, 
revenue collection, and safety and environmental inspection 

Clarity in the role of the regulator as verifier, as distinct from the role of 
industry as controller of risks 
Clarity  of  the  desired  outcomes  to  be  achieved  by  regulation  using  goal-
setting approaches to major hazard prevention and mitigation: 

In design and operation 

In construction and decommissioning 
In emergency response 
In aligning safety and environmental protection  

– 
– 
– 
Establishment  of  the  generic  level  of  expertise  required  of  the  regulator, 
and  use  of  expert  external  advisors  as  called  for  by  goal-setting 
approaches 
Indemnity  by  industry  against  costs  incurred  by  the  regulator  in  major 
hazard controls verification 
Consistency of enforcement approaches 

All  respondents,  like  the  Parliament,  emphasise  the  critical  contribution  of  expert, 
independent  and  adequately  resourced  regulators;  Parliament,  many  regulators,  non-
operator industry, citizens and NGO's regard it essential to combine regulation of health, 
safety  and  the  environment.  Industry  is  wary  of  reforms  to  regulatory  structures.  The 
importance  of  regulatory  independence  from  licensing  and  industry  sponsorship  by 
government is emphasised by some respondents, including industry. An active dialogue 
between  regulators  and  third  party  verifiers  is  seen  as  necessary  by  some  respondents. 

49 The term refers to legal competency for shared regulation of safety and environment, not to the attribute 
of being competent to do the job, by virtue of training etc 
36 

 
 
                                                 
Some  respondents  feel  an  EU-level  regulatory  agency  would  be  more  effective  in 
consolidating the best regulatory practices.  

Supporting  the  inculcation  and  maintenance  of  regulatory  best  practices  would  be  the 
setting up of a Commission-led group of regulators that would also enhance the efficacy 
of existing regional groups such as NSOAF. 

(7) 
amongst jurisdictions 

Establishing  a  platform  for  regulatory  dialogue  and  information  sharing 

The aim behind  this measure is the establishment of a means for the representatives of 
the relevant national authorities of Member States to engage into an EU-wide regulatory 
dialogue.  The  purpose  of  this  Group  would  be  to  assist  each  Member  state  and  the 
Commission  in  resolving  offshore  issues,  e.g.  identification  of  best  practices  for  major 
hazards prevention and emergency preparedness, and disseminating lessons learned from 
accident  investigations.  At  present  a  similar  framework  exists  for  labour  inspection 
services  of  the  Member  States  (SLIC50),  but  for  the  EU  regulators  of  the  oil  and  gas 
industry,  a  comparable  body  is  lacking.  The  proposed  measure  would  benefit  from 
experience  gained  by  SLIC  and  by  the  regulators  for  oil  and  gas  activities  around  the 
North  Sea,  combined  in  the  NSOAF51.  It  is  a  measure  building  on  the  example  of 
NSOAF and on the experience of ad-hoc EU regulatory workshops co-organized by the 
Commission  and  the  NSOAF  since  summer  2010,  which  also  included  participation  of 
Member States representatives from other EU offshore regions. 

All respondents with some knowledge or understanding of bodies like NSOAF and IRF 
(including the  EP) strongly support an  EU-wide forum of this kind. Opinion is divided 
(industry  –  rest)  whether  this  should  be  a  voluntary  or  a  formal  institution.  A  few 
respondents (from NGO's, and non-operator industry) see an EU inspection agency as the 
right destination for this concept.  

The second layer of this option develops policy for integrating environmental protection 
into  major  hazards  safety  regulation.  In  including  environment  within  the  formal  risk 
assessment, it would now be possible under option 2 to establish within the envelope of 
the MHR internal emergency plans that would aim to limit the escalation of an incipient 
major hazards incident to the areas controlled by the installation. The internal emergency 
plan would be the foundation of the national emergency plan for the specific area around 
the particular installation. This also makes it possible to link the preparation of national 
emergency plans to the risk assessments performed by the operators and attain coherence 
between the operator who creates the risk, and the national arrangements that protect the 
public from such risks that is not currently attainable. 

Option 2 would thus entail strengthening the effects of option 1+ by incorporating some 
of  the  environmental  measures  implemented  through  preparation  of  guidelines  in  the 
earlier option into law as follows. 

50 Committee of Senior Labour Inspectors - Commission Decision 95/319/EC 
51 Reference/explanation for NSOAF 

37 

 
 
                                                 
(10) 

Preparedness for effective emergency response to major offshore accidents 

The aim behind this measure is to achieve a level of emergency preparedness throughout 
the EU allowing the most effective response to a major offshore accident affecting any 
part  of  EU  waters  and  shores.  Standard  operating  procedures  for  such  emergency 
situations  need  to  be  consistent  across  the  EU  and  to  integrate  public  and  industry 
resources most effectively. The offshore industry has the global experience, the technical 
capacity  and  the  financial  strength  to  prepare  robust  plans  and  to  deliver  against  them. 
However, it does not have control or ownership of all assets – both human and hardware 
–  required  to  affect  a  total  response  to  all  possible  scenarios.  Much  of  the  necessary 
response lies  within the Member States'  civil contingency inventories and  mechanisms, 
for example in making available search and rescue helicopters. The control by Member 
States of response to an offshore emergency is not at question; however it can clearly be 
enhanced  if  neighbouring  Member  States  and  industry  contribute  to  the  planned 
organisational arrangements. Therefore, an ideal system will secure reliable cooperation 
from industry and other Member States, and will be capable of being thoroughly tested 
through exercises, including cross-border ones.  

All  responders  expressing  a  view  share  the  position  of  the  Parliament  in  favour  of 
regularising  cooperation  between  and  across  industry  and  coastal  states;  with  some 
pointing  out  that  North  Sea  country  already  have  exemplary  regional  arrangements. 
Some  NGO  and  regulatory  respondents  suggested  EMSA  provide  a  core  model  for  the 
oil and gas sector, others extending this idea to a specific EU emergency response group 
of  Member  States.  Some  industry  respondents  made  the  link  between  the  MHR  and 
installation  specific  emergency  planning  which  becomes  possible  when  environmental 
risk assessment is integrated with safety assessment.   

(11) 

Ensuring cross-border availability and compatibility of intervention assets 

This  component  of  option  2  concerning  intervention  assets  is  complementary  to  the 
previous measure (10) i.e. focused on operating procedures and emergency planning. The 
aim behind this measure is twofold: (i) to ensure that industry and Member States have 
assets available to limits the effect of a major accident should it occur, and (ii) to ensure 
that  Member  States  have  the  wherewithal  to  share  assets  which  are  compatible  or 
interoperable, including expertise. 

An important requirement for the industry assets is that they ought to be compatible for 
use throughout the Member States. Furthermore, the presence and deployment times of 
these assets ought to be known to contingency planning authorities in Member States, in 
order that emergency plans drawn up by Member States can take account of the relevant 
properties. 

As  the  previous  measure,  this  receives  universal  support  from  respondents  to  the 
consultation and from the Parliament's position. A number of respondents point out the 
importance  of  harmonising  standards  for  e.g.  dispersants  to  achieve  full  transboundary 
inventories of response assets. 

(12) 

Clarifying fully the scope of environmental liability  

Further to the proposed guidelines in the applicability of waste regulatory framework in 
the offshore oil and gas sectors, there is need to provide for clarifications in the scope of 
environmental  liability  for  addressing  damages  to  marine  waters.  The  Environmental 

38 

 
Liability Directive was adopted in 2004 and does not address water damage for marine 
waters  of  Member  States  beyond  territorial  waters.  The  Marine  Strategy  Framework 
Directive 2008/56, however, adopted in 2008, laid down that all marine waters under the 
sovereignty  or  jurisdiction  of  Member  States  need  to  be  protected.  Therefore,  the 
Commission  identified  a  gap  that  exists  between  the  "polluter  pays"  principle 
underpinning  environmental  EU  legislation  and  the  current  geographical  scope  of  the 
Environmental  Liability  Directive.  Action  could  be  undertaken  to  achieve  a  clear 
provision on environmental liability for water damage in marine waters.  

The  evolution  of  EU  policy  for  marine  environmental  protection  is  a  key  factor  in 
considering  the  extension  of  ELD  as  a  legal  option.  This  particular  example  is  also  an 
object lesson in the fragmentary EU legislation that needs to be regularised if the EU is 
to secure a significant reduction in risk of a major oil and gas accident in its waters. In 
view of the critical importance of this matter at the policy level as revealed by the ELD 
considerations,  we  have  included  a  detailed  explanation  in  Annex X, in addition to  the 
explanatory text for all implementing measures in Annex XI. 

Industry  accepts  the  polluter  pays  principle  but  some  respondents  made  the  point  that 
liability  should  be  based  on  worst  case  scenario  modelling  and  the  availability  of 
baseline status to reveal any pre-existing damage in the marine environment. Concern is 
also  expressed  that  extending  ELD  could  create  uncertainty  and  duplication  of  liability 
and  inadvertent  capture  of  other  sectors  (shipping).  NGO's  and  citizens  are  strongly  in 
favour  of  extending  strict  liability  in  all  EU  waters.  Regulators  and  non-operating 
industry give broad support to this measure, which is also strongly supported by the EP 
position.    

Supporting best industry/regulator and  environmental practices that are implemented in 
option  2  as  described  above  would  be  a  third  layer  that  provides  greater  transparency 
than  at  present  of  industry  and  regulator  performance.  This  would  lead  to  a  number  of 
reporting requirements between industry and MS and between MS and the Commission, 
and general publication of EU performance and lessons learned from incidents. 

(9) 

Comprehensive information sharing and transparency 

Currently, Member States that try to share performance related data spend a great deal of 
time  and  effort  in  harmonising  data,  leading  to  compromises  in  the  validity  of 
information. The aims behind this measure, supported by stakeholders responding to the 
Public Consultation, would be three-fold: 

(i) 

(ii) 

(iii) 

to  encourage  knowledge  transfer  across  the  industry  and  regulators  and  the 
sharing of 'lessons learned' to promote continuous improvement in major incident 
prevention 
to  give  public  access  to  information  on  the  performance  of  both  industry  and 
regulators  on  the  basis  of  which  interested  members  of  the  public  can  either 
formulate queries or gain assurance that, in the EU, the industry is well run and 
regulated.  
to  ensure  that  the  public  and  potentially  affected  countries  are  consulted  to  an 
appropriate degree as part of the authorisation/licensing process. 

This  measure  reflects  the  Parliament's  position  and  is  broadly  supported  by  all 
respondents,  although  operators  are  concerned 
that  commercially  confidential 
information  must  be  protected,  and  operators  also  suggest  more  positive  information 

39 

 
 
 
 
should be published about the industry's contribution to the economic and technological 
wellbeing of the EU. This measure is seen by NGO's, citizens and non operating industry 
members  as  critical  to  improving  safety  culture  and  aiding  improved  performance. 
Protection of whistle blowers is regarded by some respondents – NGO's and citizens (and 
Parliament)  as  an  essential  precursor.  Many  (including  some  non  operator  industry 
members,  but  not  industry  or  regulators)  see  the  role  of  a  cross-EU  regulator  body  as 
pivotal for effective transparency.  

4.2.5.  Option 3  

Option 3 goes further than Option 2 not necessarily in the extent of the new operational 
model for the sector but rather in the degree of its consolidation and institutionalization. 
Where feasible and admissible from the point of view of subsidiarity and proportionality, 
this option seeks the creation of an EU body(ies) as the means to implement of most of 
the measures comprising Options 1, 1+ and 2. For example, an EU body/agency would 
be  tasked  to  undertake  inspections  and/or  investigations  of  major  hazard  incidents  and 
oversee  the  performance  of  MS  competent  authorities  and  third  party  verifiers  (e.g. 
classification  societies).  The  option  also  assumes  the  creation  of  an  EU  intervention 
capacity, and helping build capacity for emergency response beyond the EU.  

To summarise, this option has the effect of consolidating and institutionalising at the EU 
level the following delivery measures that are inherent to the other reform options: 

1  (Verification of operators technical capacity) 
2  (Regular inspections and penalties regime) 
3  (Submission of formal safety assessments for acceptance by the regulator) 
5  (Extending EU practices to overseas operations) 
6  (Establishing a competent authority) 
7  (Establishing a platform for regulatory dialogue) 
10 (Preparedness for emergency response) 
11 (Cross border availability of compatible assets) 
12 (Clarifying the scope of environmental liability)  

There are a number of EU bodies, such as EMSA in maritime safety or even in atomic 
energy  regulation,  that  could  be  considered  as  blueprints  or  for  adoption  (at  least 
partially) in lieu of the creation of a new entity. However, at least to some degree account 
would have to be taken of the fact that existing entities may not be entirely suitable for 
the nature of the offshore oil and gas industry which is essentially non-maritime52, and 
has very different risk profiles to the nuclear sector. So a new design could be required. 

Of  the  measures  implemented  by  option  2,  creating  an  institution  under  option  3  is 
assessed  to  have  the  most  significant  impact  on  securing  more  consistent  safety 
performance by EU based operators. 

(5) 

Extending EU practices to overseas operations 

The aims behind this measure, evidenced through the public consultation and European 
Parliament positions as one of the most pressing for European public, are twofold. Firstly 

52 Offshore installations, when on station, are in effect land-like major industrial sites placed in a marine 
environment. 

40 

 
                                                 
to give assurance inside the EU that companies headquartered here have adopted a true 
best  practice  culture  such  that  their  operations  are  reliably  consistent  worldwide. 
Secondly  it  is  to  demonstrate  globally  that  EU  level  standards  effectively  reduce  risks 
and  therefore  damages  to  economies  and  environments  which  would  increase  pressure 
everywhere to attain EU level standards for offshore operations. The measure recognises 
that in practice, it would be difficult to enforce binding requirements on the application 
of  EU  standards  in  third  countries.  However,  by  achieving  recognition  that  the  EU 
frameworks  for  offshore  operations  are  exemplary  in  nature,  the  EU  will  be  in  better 
position to promote the levelling up of offshore safety requirements in other jurisdictions 
to the benefit of the EU itself. This could be e.g. be attained by securing agreements on 
good  practice  standards  e.g.  with  IMO,  neighbouring  states  and  IRF  members  and/or 
securing voluntary agreements with EU based companies. 

Like  the  Parliament,  most  respondents  are  supportive  of  the  principle  that  failure  to 
follow EU best practice overseas is an adverse trait amongst EU companies. NGO's and 
citizens particularly feel this should result in strong sanctions – refusal or withdrawal of 
licensing.  Regulators  are  more  circumspect  regarding  the  legality  of  sanctions  for 
perceived failings in another jurisdiction, and operators generally feel this ambition to be 
unattainable  due  to  varying  requirements  of  overseas  regulators  notwithstanding  best 
endeavours  of  operators.  Some  respondents  –  NGO's,  citizens  and  some  non  operating 
industry  respondents  believe  an  EU  regulatory  agency  could  be  effective  in  securing 
more consistent international performance by operators. 

4.3. 

Summary of options  

The  alignment  of  the  policy  options  with  each  other  and  their  suitable  modes  of 
implementation are illustrated in the table below.  

No. 

Measure 

Option 
0 

Option 
1 

Option 
1+ 

Option 
2 

Option 
3 

Table 5 
Comparison of policy options 

1 

2 

3 

4 

5 

6 

7 

9 

10 

11 

Detailed  verification  of  the  technical  capacity  of 
potential operator 

Establishing  regular  inspections  and  a  penalties 
regime 

Submission  of  formal  safety  assessments  for 
acceptance by the regulator 

Extension  of  MHR  into  a  comprehensive  risk 
management model 

Extending EU practices to overseas operations 

Establishing a Competent Authority 

Establishing a platform for regulatory dialogue 

Comprehensive 
transparency 

information 

sharing 

and 

Preparedness  for  effective  emergency  response 
to major offshore accidents 

Ensuring 
compatibility of intervention assets 

cross-border 

availability 

and 

41 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

L 

L 

0 

0 

0 

0 

0 

0 

0 

G 

L 

L 

0 

G 

0 

0 

0 

G 

G 

L 

L 

L 

L 

G 

L 

L 

L 

L 

L 

EU 

EU 

EU 

L 

EU 

EU 

EU 

L 

EU 

EU 

 
No. 

Measure 

Option 
0 

Option 
1 

Option 
1+ 

Option 
2 

Option 
3 

12 

Clarifying the scope of environmental liability 

0 

0 

G 

L 

L 

Table legend: 
0 
G 
L 
EU  Measure (further) institutionalised at EU level (e.g. in EU body) 

Measure not implemented 
Measure implemented through guidelines 
Measure implemented through legislation 

As  analyzed  in  detail  in  Annex  XI,  a  measure  can  be  implemented  by  different  means, 
often offering a trade-off between effectiveness and complexity/practicality. This results 
in  differences  amongst  the  way  individual  measures  are  to  be  implemented  under 
individual  options.  For  example,  Measure  11  (Ensuring  cross-border  availability  of 
common response assets) may be implemented through guidance in Option 1+, through 
new  law  in  Option  2,  or  through  an  EU  institution  in  Option  3.  As  result,  each  of  the 
policy options is characterized on one hand by the set of measures retained in the option 
and by the preferred implementation means for each measure under that option.  

There is generally a wide consensus in the stakeholder community that the measures we 
have identified as components of the 4 options can be both implemented by the industry 
and regulators and will be effective in reducing risks of major accident hazards offshore 
in the EU. This is evidenced inter alia by the similarity of the measures recommended or 
advocated  and  action  plans  proposed  in  the  positions  and  statements  of  the  different 
stakeholder  groups  –  the  reports  and  declarations  adopted  by  the  European  Parliament, 
the  Commission  views  and  plans  expressed  in  the  October  2010  Communication,  the 
recommendations of existing groups of regulators (such as NSOAF or IRF53) and also the 
recommendations and action plans issuing from the industry (OSPRAG, GIRG)54. 

4.4. 

Deferred options 

Three of the measures (8, 13, 14 in Table 2) deal with product safety and the financial 
capability of operators to fully cover civil liabilities for damage. They are antidotes to the 
problem  drivers  and  would  complete  full  implementation  of  options  which  satisfy  the 
specific  objectives.  But  they  are,  as  yet,  insufficiently  mature  to  be  included  in  this 
impact assessment 

Product safety 

Achieving  consistency  of  product  and  equipment  safety  standards  across  the 

(8) 
sector 

The  aim  behind  this  option  is  to  obviate  a  regulatory  anomaly,  clearly  identified  as 
unhelpful by regulators and some parts of industry – primarily on the supplier side, but 
also  amongst  oil  companies  -  in  the  responses  to  public  consultation  and  in  bilateral 
discussions, . Mobile offshore drilling units (MODUs) are subject to the voluntary IMO 
MODU Code but only in respect of maritime equipment, while the code does not cover 
drilling equipment – including well control equipment such as BOP's. At the same time, 
MODUs  are  entirely  exempt  from  EU  product  safety  legislation,  being  treated  a  ships 
when  in  fact  they  are  -  when  stationed  for  drilling  -  industrial  sites  based  at  sea.  This 
legislation does apply to equipment used on non-mobile facilities, but the lack of specific 

53 http://www.irfoffshoresafety.com/conferences/2010conference/communique-nov-01-2010.aspx 
54 See Annex XII 

42 

 
                                                 
harmonised  standards  leads  to  a  low  level  of  consistency  and  compatibility  in  safety 
critical  equipment  and  increased  cost  burdens  on  industry  working  between  different 
Member  state  jurisdictions.  Safety  deficits  arise  from  lack  of  familiarity  of  crews 
operating between different jurisdictions.  

There  is  considerable  support  by  industry  respondents  (operating  and  non-)  and 
regulators (NSOAF) for this measure. However, matters related to equipment used in the 
offshore oil and gas industry concern also the ATEX sector, alongside the Machinery and 
the  Pressure  Equipment  sectors.  Therefore  this  issue  has  been  referred  beyond  this 
impact  assessment.  Following  a  EU  Workshop  in  February  2011  on  standards  for 
equipment used in the offshore oil and gas industry, a draft Standardisation Mandate has 
been  developed.  The  Commission  is  currently  consulting  the  European  Standardisation 
Organisations and other stakeholders informally on the Draft Mandate, before submitting 
it to the Directive 98/34/EC Committee. A specific discussion point on this issue will be 
included  into  the  agenda  of  the  next  ATEX  Working  Group  meeting,  to  be  held  in 
Brussels in January 2012. 

Liability for damages 

(13) Ensuring financial capacity of operators to cover environmental liability 

The aim behind this part of the option for covering all liability for damages is to assess 
the possible mechanisms to better guarantee that, in addition to a clear liability system in 
the EU, operators can cover any arising liabilities, in particular in the event of a major 
accident.  This  option  aims  to  overcome  any  vagueness  within  present  provisions  in 
relevant  EU  legislation  (Directive  94/22/EC,  Directive  2004/35/CE  (ELD))  and 
differences  in  availability  of  information  throughout  different  stages  of  offshore 
licensing.  The  assessment  of  the  financial  capacity  may  differ  in  detail  for  the 
exploration  phase,  where  information  concerning  the  contingent  liabilities  is  less 
detailed,  while  for  licensing  at  the  development  or  production  stage  much  detailed 
information will be available for a thorough assessment of risks. The assessment of the 
financial capacity requires assessing in any case the guarantees and financial security for 
liabilities to be conducted, prior to award of a license.  

This policy  option reflects concerns of the general public expressed through the Public 
Consultation  as  well  as  identified  shortcomings  in  the  present  regulatory  framework 
identified by both the Commission and the European Parliament and Council. However, 
there  are  a  variety  of  positions  on  this  measure,  which  itself  is  complex  as  liabilities 
range  between  traditional  ones  (civil  included)  and  environmental.  Industry  broadly 
favours  some  (high)  limitation  on  liability  relative  to  fairness,  underpinned  by  existing 
pooling  arrangements,  with  the  North  Sea  OPOL  arrangement  seen  as  a  model  and  re-
insuring: there is concern that smaller operators would be needlessly priced off the scene. 
Insurers  feel  their  members  are  probably  unable  to  provide  all  foreseeable  cover  to 
address  an  extraordinary  event  similar  to  the  Deep  Horizon,  and  in  any  case  major  oil 
companies have large liquid assets that would not require underwriting - particularly on a 
EU basis. For insurers, global instruments provide the only realistic chance of adequate 
funding pools to address off-shore risks. NGO's and citizens urge taking criminal powers 
to  enforce  liability;  a  limited  reference  is  made  to  an  EU  inspection  agency  providing 
better assurance of responsible behaviour by liable parties.  

(14) Establishing compensation regimes for traditional damage (civil liabilities)  

43 

 
The aim of this measure would be to ensure that EU has a comprehensive liability regime 
not only for environmental damage but also for traditional liabilities such as human life 
losses and economic losses to different sectors like fishing and tourism. The Deepwater 
Horizon experience revealed the extent to which such traditional liabilities may quickly 
come  to  dominate  public's  attention  and  interests  following  a  major  accident  causing 
extensive damage not only to the environment but also to coastal communities and local 
economies. 

There  is  widespread  support  from  Parliament  and  from  public  consultation  for  a  strict 
damages  scheme  to  assure  rapid  payout  to  affected  businesses/individuals.  Some 
respondents envisage such schemes should be supported by regional cash pools (fed by 
operators).  Operators  are  relatively  silent.  Regulators  are  divided  whether  new 
arrangements are needed, and some are wary of a deterrent effect on smaller operators. 
NGO's suggest criminal powers to enforce rapid damages payments to victims. 

In respect of both these provisions, as they concern issues of a relatively high complexity 
in terms of national legal frameworks for civil liability but also international implications 
and  harmonisation  of  their  impacts,  they  are  not  pursued  in  this  impact  assessment. 
Instead, the Commission continues the analysis of the subject together with stakeholders, 
for  example  in  the  insurance  sector,  in  supporting  national  regimes  to  examine 
harmonisation  of  civil  liability  provisions,  and  in  encouraging  consideration  of 
international pooling arrangements (with IMO). Financial and administrative provisions 
have  been  made  in  the  2012  Commission  budget  to  pursue  further  this  work  (studies, 
consultation, etc).   

5. 

IMPACT ASSESSMENT OF POLICY OPTIONS 

In this chapter, each of the policy options outlined in Chapter 4 is assessed on the basis 
of its most important and relevant likely impacts: 

•  the extent to which they mitigate the risk/costs of offshore accidents, 
•  regulatory and compliance costs on Member States, industry and the Commission, 
•  other environmental, social, economic and external impacts. 

The main objective of any policy action in this field is to reduce the risk of accidents and 
thereby  to  avoid  human,  environmental  and  economic  losses.  Therefore,  the  first 
criterion to be evaluated will be the proposed policy’s impact on mitigating the risk/costs 
of offshore accidents to the Member States. This is assessed by the estimated impact of 
the  measures  under  each  policy  option  on  the  baseline  range  of  €205-915m  annualised 
costs introduced in the baseline analysis in chapter 2.   

Box 3: Estimation of the effectiveness of the proposed policy options in reducing the 
cost of major accidents  

Estimating the effectiveness of the proposed policy options in reducing the probability and therefore the 
cost  of  major  accidents  is  a  difficult  task  and  can  only  be  made  by  expert  opinion  based  on  the  best 
available  information.  In  fact,  while  there  are  databases  of  accidents  and  incidents  that  have  occurred, 
information about accidents that have been prevented is not available. Furthermore, because the proposed 
measures within the different options are sui generis, our estimates of their effectiveness are based on the 
best possible data we have available, always normalised to account for the size of the relevant population 
of  oil  wells  and  offshore  activities.  An  account  of  the  exact  estimations  for  each  one  of  the  proposed 
options is given in Annex IV.  

The followed approach can be demonstrated taking the example of Option 1. The proposed measures here 
– with respect to the baseline scenario – are the application of a goal setting (or objective-based) regime 

44 

 
and the establishment of regular inspections and penalties regime. The effectiveness of these measures is 
estimated by expert opinion in light of the strong empirical evidence of the effectiveness of objective-
based risk management in the offshore sector. Indeed, the UK Health and Safety Executive’s Offshore 
Safety Division has collated statistics on offshore accidents and ill health from 1995/96 to 2009/10. During 
or  just  before  this  period,  several  key  pieces  of  legislation  were  introduced  mandating  the  goal  setting 
approach to offshore regulation on the UK continental shelf. The statistical data demonstrate a significant 
reduction in accident rates (and an increase in safety), which – according to HSE – can also be attributed to 
the  introduction  of  the goal setting legislation. Furthermore, studies comparing blowout rates in Norway 
and  in  the  USA  have  demonstrated  significantly  lower  rates  for  Norway,  which  is  also  attributed  to  the 
application of the goal setting legislation. Based on this evidence, it was assumed a 50% reduction of the 
major offshore accidents rate.  

The  difference  between  Option  1  and  the  Baseline  Scenario  is  application  of  the  goal-setting  regime  in 
Italy and Spain - since this regime is already applied in the North Sea countries. Italy and Spain count for 
408 out of 6315 wells in Europe, i.e. 6.5% of offshore activity. Taking into consideration the assumed 50% 
reduction  of  accident  rate,  overall  offshore  accident  cost  reduction  between  €7  and  €30  million  is 
estimated.  

Secondly, the additional financial and administrative costs of implementing the proposed 
policies to Member States, the industry and the Commission will be highlighted and to 
the  possible  extent  quantified.  These  economic  costs  can  be  roughly  divided  into 
regulatory  costs  (the  costs  incurred  by  public  authorities  in  providing  the  oversight 
necessary to effectively implement the policies) and compliance costs (the costs incurred 
by  industry).  All  cost  elements  can  further  be  divided  into  one-off  costs  (the  initial 
investment  needed  to  update  practices  with  the  regulation)  and  running  costs  (the  on-
going operational cost). 

Regarding regulatory costs, the cost to the regulator of enforcing regulations is primarily 
the opportunity cost of the time taken to enforce and provide support to the operators as 
required.  This  was  gauged  by  means  of  two  questionnaires  presented  to  European 
offshore  regulators  in  combination  with  calculations  as  per  the  EU  Administrative 
Burden Calculator. 

The  compliance  cost  that  industry  bears  can  be  divided  into  three  categories  following 
the  EU  Standard  Cost  Model  as  defined  in  Annex  10  of  the  Impact  Assessment 
Guidelines.55 

1) Administrative burdens are the costs on businesses of complying with the information 
obligations  resulting  from  legislation  and  regulations.  An  example  of  administrative 
burdens  in  the  offshore  sector  may  be  the  notification  of  dangerous  occurrences, 
inspections, and reading guidance material. 

2)  Substantive  compliance  costs  are  the  costs  that  businesses  incur  in  order  to  comply 
with  the  content  obligations  that  legislation  and  regulations  require  of  a  production 
process  or  a  product.  In  the  offshore  sector  these  include  the  costs  of  additional 
equipment or machinery to ensure compliance, or the costs of hiring consultants to help 
with compliance. 

55 http://ec.europa.eu/governance/impact/commission_guidelines/docs/ia_guidelines_annexes_en.pdf. 

45 

 
 
 
                                                 
3) Financial costs are the result of a concrete and direct obligation to transfer a sum of 
money to the Government or the competent authority. An example of a financial cost in 
the offshore sector is the fee for notification charged by national regulators. 

Each of these categories of compliance cost has been gauged by means of a questionnaire 
presented to industry, and supplemented with calculations as per the EU Administrative 
Burden Calculator.  

For  the  purposes  of  calculating  some  administrative  burdens,  the  opportunity  cost  is 
assumed to be equal to the wage rate of the relevant member of staff, inflated by 30%. 
This 30% adjustment is to  reflect the  true economic  cost  of employing  that member  of 
staff  and  includes  employer  taxes  and  pension  contributions,  as  well  as  so-called 
‘overhead-costs’ such as premises, telephone, heating, electricity and IT equipment. 

Finally,  a  section  for  each  option  summarizes  other  relevant  environmental,  social, 
economic or external impacts associated with the option. 

The  impacts  of  all  analyzed  policy  options  have  also  been  assessed  in  relation  to  the 
respect of fundamental rights as described in the EU primary law (notably in the Charter 
of Fundamental Rights of the European Union) and case law of the Court of Justice of 
the EU. 

This  chapter  presents  only  the  highlights  of  the  impact  analysis  conducted.  Annex  IV 
provides further details on the findings and the estimates and modelling employed. This 
chapter  does  not  provide  a  comprehensive  enumeration  of  every  possible  impact  but 
focuses on select key dimensions where the scale of the impact is most significant, where 
its  nature  is  well-understood  and  where  the  combination  of  clear  facts  and  dependable 
data  allow  concrete  conclusions  to  be  drawn  as  a  basis  for  policy  formation.  The  main 
reason for such limitation is the lack of comparable and authoritative data available to the 
Commission at present. Where possible, proxies or modelling were used to make up for 
missing hard figures. 

In the following paragraphs, benefits and costs are presented for each individual policy 
option.  As  the  policy  options  constitute  a  phased  approach  for  implementation  of 
measures, the benefits and costs will accrue with the execution of each policy option. At 
the end of this chapter, a table is included showing the incremental (aggregated) benefits 
and costs for all the policy options.  

5.1. 

Option 0 - No EU Action 

The  analysis  of  impacts  of  Option  0  is  in  fact  contained  already  in  Chapter  2  (and  the 
supporting Annex I) as the Baseline, as per its expected evolution, coincides in practice 
with Option 0. To summarize the baseline evolution, substantial material improvement to 
the  overall  level  of  risk  control  in  the  EU  as  a  whole  by  operators  and  regulatory 
authorities  is  not  considered  likely  without  an  EU  policy  stimulus.  Individual  Member 
States may implement partial measures, but probably where the level of safety is already 
above  average.  Even  in  those  cases,  however,  there  is  no  foreseeable  change  in  the 
intensity  of  regulation  and  control  of  the  major  hazard  aspects,  including  loss  of  well 
control.  Transparency  –  at  a  low  level  in  this  sector  compared  to  other  major  hazards 
sectors - will not improve, and so public confidence in the sector will not be noticeably 
enhanced.  

46 

 
Because  of  continuing  initiatives  by  industry,  global  agencies  and  institutions,  and 
Member States, there will be incremental improvements in emergency preparedness and 
response  capability,  particularly  in  the  North  Sea  where  the  intensity  of  research  is 
greatest  in  the  EU.  The  effect  of  these  efforts  may  however  be  counterbalanced  by  the 
increasing  risks  of  operations  due  to  the  overall  industry  trend  toward  more  "frontier" 
and complex operations undertaken by major companies, whilst the existing inventory of 
ageing platforms continues to be divested to smaller operators. 

As a result, it can be estimated (Annex 1) that Option 0 will not result in any change to 
the range of  €205 – 915 million of estimated le velized annual costs of damage caused in 
the  European  offshore  sector  and  that  this  range  remains  representative  of  the  future 
record of the sector as well. 

5.2. 

Option 1 

It  should  be  noted  that,  because  this  option  aims  to  level-up  all  European  offshore 
regimes to currently existing best practice, some Member States will be more affected by 
it than others. The calculations presented in the annex supporting this chapter specifically 
address this (see Section 1 in Annex IV). By contrast, because every subsequent option 
proposed in this report (Options 1+, 2 and 3) is premised on the implementation of the 
present  one,  this  report  assumes  that  Member  States  will  be  equally  affected  by  these 
subsequent options. 

5.2.1. 

Impact on risk mitigation 

In this option, the offshore oil and gas industry in all EU jurisdictions would be required 
to  prepare  a  major  hazards  report  (MHR)  based  upon  the  North  Sea  practice  in  the 
implementation  of  the  requirement  for  a  safety  and  health  document  in  the  Drilling 
Extractive  Industries  Directive  92/91/EEC.  The  MHR  would  amplify  the  minimum 
requirements of Directive 92/91/EEC towards prevention of offshore major hazards, for 
example  marine  well  control,  structural  integrity  of  offshore  platforms,  and  survival  of 
personnel  in  an  emergency.  Current  practice  is  the  North  Sea  region  is  also  for  a  well 
plan  to  be  notified  to  the  regulator  that  contains  key  information  on  well  design  and 
control  measures  in  sufficient  time  for  the  regulator  to  form  a  competent  view  on  the 
suitability of the plan and to intervene if necessary to require additional safeguards.    

Option 1 measures thus go further than Directive 92/91/EEC necessarily obliges because 
regulators  would  be  required  to  receive  the  report  for  their  verification  of  the  control 
measures, and be required to base their inspection and investigation regime on the MHR 
while introducing a system of penalties for breaches of duty. This would bring about a 
step change in Member States that currently do not practice a risk based regime of this 
intensity, for example those who use a more generic approach based on a "minimalist" 
interpretation of the broad framework of Directive 92/91/EEC.  

The main effect of this option is to define the relationship between the duty holder and 
the  regulator  on  the  basis  of  their  shared  responsibilities  towards  risk  assessment  as 
cemented  in  the  MHR.  The  option  would  not  go  beyond  this  point  of  principle  but 
nevertheless  secures  some  progress  towards  the  goal  of  consistent  risk  assessment  by 
requiring industry and regulators to adopt a goal setting regime based around the health 
and safety document (92/91/EEC) but going further. This induces partial improvement in 
the safety culture of industry. An informal grouping of EU offshore authorities is likely 
to  form  which,  when  combined  with  new  information  emerging  via  the  formal  risk 

47 

 
assessments,  makes  available  new  information  for  sharing  and  learning.  Upgraded 
inspection and penalties also supports this trend.  

Correspondingly,  the  range  of  estimated  annualized  cost  of  damage  used  as  baseline 
would  be  affected  but  only  as  regards  regions  other  than  North  Sea.  Using  data  on  the 
proportion of operations in the North Sea region and other parts of the EU, the reduction 
in the levelized costs of annual damage for the whole of Europe have been estimated to 
be between €6.66 and €29.7 million annually compar
ed to the baseline scenario (details 
in Section 1.1 of Annex IV). These figures follow from a reduced impact on losses from 
an  offshore  incident  as  a  result  of  implementation  of  this  policy  option,  in  areas  other 
than  the  North  Sea.  Because  the  levelized  annual  cost  is  a  surrogate  for  risk  (i.e.  a 
product of likelihood and consequence of a major incident in EU waters), the reduction 
in levelized costs can be used as a surrogate for reduction in risk. Therefore this option 
contributes  a  3%  reduction  in  baseline  risk  (average  of  risk  reduction)/(average  of 
baseline risk).  

Vicarious effects and omissions of option 1 

The focus on risk assessment would stimulate some elective improvement in regulatory 
and  industry  practices  and  equipment  standards,  but  this  would  be  patchy.  Voluntary 
groupings of regional Chief Inspectors might emerge outside of the North Sea, along the 
NSOAF model.  

This  option  would  not  address  all  of  the  best  practice  measures  that  target  the  full 
panoply  of  problem  drivers.  For  example  it  does  not  mandate  industry  to  adopt  a 
consistent  culture  in  the  management  of  their  major  hazard  operations  (see  option  2 
below).  Nor  does  it  integrate  environmental  aspects  into  the  MHR.  Current  levels  of 
transparency of performance and sharing lessons learned would remain unchanged. 

5.2.2.  Regulatory and compliance costs 

To  implement  these  two  measures  (on  industry  and  the  regulator)  would  require 
legislation. It would not be practicable to introduce through voluntary means this level of 
requirement on industry and regulators that do not currently operate such a regime from 
within their own jurisdictions (i.e. the EU regions outside the North Sea). For example, 
responsibility for the MHR regime would need to be applied to defined entities (broadly, 
licensed  operators  and  mobile  rig  owners)  who  have  a  duty  to  submit,  and  to  comply 
with the measures contained in, the MHR. There would need to be a concomitant offence 
for  non  submission/compliance.  Regulators  would  need  to  acquire  the  means  to 
discharge their responsibilities towards the MHR and the inspection/enforcement regime 
that  accompanies  it.  An  enforcement  model  would  need  to  be  introduced  to  secure 
consistent action by regulators on operators throughout the EU. 

Regulatory and compliance changes will be necessary only in regions outside the North 
Sea.  Based  on  available  data  on  the  difference between the costs  of  administration  and 
compliance  in  the  goal-setting  regime  of  the  North  Sea  and  regions  with  other  (e.g. 
prescriptive) regulatory regimes, it can be estimated that Option 1 will lead to an increase 
of  compliance  costs  for  the  industry  to  the  tune  of  €35.50m  per  year  under  the  present 
extent  of  operations  in  the  individual  EU  offshore  regions  (details  in  Section  1.2  of 
Annex  IV).  As  for  administrative  costs  for  public  authorities,  these  are  not  likely  to 
exhibit major increases as available data (see Section 1.2 of Annex IV giving details on 

48 

 
data collected by the Commission through questionnaires issued to regulatory authorities 
throughout  the  EU)  show  that  administrative  expenses  and  budgets  of  the  regulators  in 
the  goal-setting  North  Sea  region  are  not  necessarily  higher  than  in  other  regions. 
However,  one-off  retraining  costs  to  the  staff  of  prescriptive  based  regimes  can  be 
expected. 

Since Option 1 is the one aiming at bringing other EU regions to the North Sea standard, 
it is the only one where it is anticipated to have a disproportionate impact on Italy and 
Spain  with  regards  to  North  Sea  countries.  They  are  the  Member  States  most  likely  to 
strongly benefit from the package of proposed measures in terms of improved safety.  

5.2.3. 

Social, economic and environmental impacts 

The social, economic and environmental impacts are primarily related to the reduction of 
probability  and  limitation  of  effects  of  accidents  as  large  offshore  accidents  can  have 
devastating consequences as demonstrated earlier. 

However, it is important to take into account all impacts of proposed measures in given 
context  where  the  urgency  to  prevent  accidents  and  their  consequences  becomes  even 
clearer. Strengthening of the regulatory requirements would lower the probability of the 
secondary  impacts  of  accidents  that  threaten  to  negatively  affect  many  related  sectors, 
such as tourism or fisheries with impacts going far beyond the obvious scale of offshore 
oil and gas sector.  

This approach would also bring additional benefits for economies outside North Sea as 
the goal-setting regimes typically create new business opportunities for consultancies and 
specialist  expertise  service  companies  who  help  with  the  preparation  of  major  hazard 
report.  It  is  worth  noting  that  such  related  consultation  services  open  opportunities  for 
SMEs in an otherwise very complex, resource and capital demanding industry.  

Though  some  assessments  of  hazards  would  be  made  in  connection  with  health  and 
safety of workers on the basis of existing legislation, no additional protection would be 
introduced for environmental aspects beyond present North Sea practices.   

5.3. 

Option 1+ 

5.3.1. 

Impact on risk mitigation 

Compared to Option 1, Option 1+ can be expected to achieve incremental improvement 
in technical capability verification at the licensing stage, but makes complete liability of 
operators  for  any  pollution  very  clear,  and  formalises  the  goal  of  making  emergency 
assets  and  plans  suitable  for  sharing  across  MS  borders.  EU  begins  to  secure  raised 
standards overseas and establishes the principle of EU based companies as ambassadors 
in  this  regard.  This  may  have  some  deterrent  effect  on  operators  and  therefore  the 
reduction  of  the  levelized  annual  damage  can  be  more  significant  that  under  Option  1 
though not in a major way. However, due to the characteristics of the measures and the 
fact  that  implementation  of  the  individual  measures  under  this  policy  option  is  by 
guidance only, it became apparent that the benefits and the costs for each measure could 
not  be  precisely  quantified.  Instead,  a  more  general  approach  is  taken  for  this  policy 
option, where the benefits and costs for the entire policy option are determined, instead 
of for each individual measure. As already indicated, the complete option will result in 
reduced  losses  as  a  result  of  a  blow-out.  In  Section  2.6  of  Annex  IV  this  is  further 

49 

 
quantified.  The  benefits  under  this  policy  option  are  estimated  to  be  between  €17.85  – 
€79.3m annually, compared to the baseline scen ario. The cumulative effect of options 1 
and  1+  together  is  €24.5-109.0m,  which  re presents  a  reduction  on  the  baseline 
(equivalent to a reduction in risk) of 12%.  

Vicarious effects and omissions of option 1+ 

Further  improvements  would  be  induced  in  industry  and  regulatory  practices  by  the 
systematic application of emergency response planning at the national level and the cross 
boundary  sharing  of  plans.  Elective  minor  improvement  is  envisaged  at  the  licensing 
stage  vis  a  vis  financial  risk  through  closer  involvement  with  the  regulator  on  the 
technical  risks  pertinent  to  the  area  being  licensed.  This  measure  will  also  assist  in 
developing  response  capacity  in  non  EU  neighbour  states,  and  in  promoting  EU 
standards worldwide. 

What  this  measure  will  not  achieve  is  a  significant  impact  on  prevention  of  a  major 
incident beyond that achieved in option one. In other words option 1+ will not induce a 
further  significant 
industry  safety  culture,  environmental  risk 
assessment, joined up inspection by safety and environment regulators, and transparency. 

improvement 

to 

5.3.2.  Regulatory and compliance costs 

The  option  would  firstly  require  the  licensing  authorities  of  MS  to  make  certain 
minimum steps to determine the technical 'entry level' for applicants in the various stages 
of  licensing  which  each  MS  practices.  We  generalize  these  as  (i)  initial  survey  (i.e.  to 
conduct  seismic  and  other  surveys  to  identify  potential  hydrocarbon  prospects); 
exploration (to carry out exploration drilling); and production (to establish a production 
facility and to produce and market oil and/or gas). This measure would complement, at 
the  licensing  stage,  the  risk  based  approach  applied  to  the  operational  phases  (drilling 
and production) and would involve formal cooperation between licensing authorities and 
safety and environment regulators. 

The  implementing  measures  are  relatively  straightforward  and  do  not  require  making 
new law. Sharpening the requirements for scrutiny of technical capacity of applicants for 
licensing can be achieved by issuing guidelines on the application of Article 5 (1) (a) and 
(d) of Directive (94/22/EC) on hydrocarbon licensing. 

Clarifying  the  liability  faced  by  licensed  operators  could  be  achieved  to  a  large  extent 
through  issuing  guidelines  clarifying  the  application  of  EU  waste  law  to  oil  spills. 
However,  this  approach  would  not  address  the  fact  that  the  Environmental  Liability 
Directive  200/35/EC  does  not  address  water  damage  in  marine  waters  and  is  therefore 
not in line with the coverage of the Marine Strategy Framework Directive 2008/56/EC.  

Striving  for  compatibility  and  interoperability  of  national  response  assets,  collating 
industry  owned  inventories  of  equipment  and  similarly  striving  for  compatibility  of 
industry  equipment  with  national  inventories  appears  to  be  achievable  through  issuing 
guidelines. We take this view in the light of the considerable activity being taken jointly 
by  some  MS  and  industry  on  improving  emergency  response  assets  following  lessons 
learned from the Deepwater Horizon disaster. An extension of the soft approach appears 
appropriate within the context of option 1+ to achieve agreement to a common template 
for national response plans that may be shared between MS and non EU neighbours.  

50 

 
Extending  EU  efforts  overseas  is  not  possible  through  legislative  means.  Pursuing 
agreements through existing channels available to the EU, eg in IMO, NSOAF and IRF 
can  be  stimulated  through  MS  membership  of  these  organizations.  The  work  on 
compatibility  of  national/industry  owned  assets  and  a  template  for  national  response 
plans  will  facilitate  diplomatic  efforts  to  grow  capacity  in  non  EU  neighbours.  It  is 
consistent with this generic approach to the implementing measures in option 1+ to also 
strive  for  voluntary  agreements  with  EU  based  companies  to  wherever  possible 
implement and display their EU operating standards when operating farther afield.  

All  this  will  represent  additional  administrative  costs  for  regulators  in  all  EU 
jurisdictions  with  offshore  safety  activities.  However,  these  costs  will  be  lower  than 
under  Option  2  which  assumes  more  profound  changes  to  their  operations.  Precise 
quantification of the administrative costs proved to be not possible, as already indicated 
in the previous section. However, based on the approach taken and elaborated in Section 
2.6 of Annex IV, the additional administrative costs have been estimated at €2.53 million 
annually. 

Implementing Option 1+ will have higher industry compliance costs than Option 1 due to 
the  further  change  in  operating  practices.  Based  on  this  assumption,  the  additional 
compliance costs for industry under this option have been estimated to amount to €15.79 
million  annually  (see  Section  2.6  in  Annex  IV).  Cumulative  costs  are  estimated  at 
€53.82m. 

5.3.3. 

Social, economic and environmental impacts 

While Option 1+ doesn't bring many significant improvements over Option 1 in terms of 
prevention, its benefits in the area of minimising the negative impacts of accidents can 
have positive impacts on social factors threatened by large scale incidents, which is how 
we  estimate  the  overall  decrease  on  baseline  risk  of  options  1  and  1+  together  is  12% 
compared to 3% by option 1 alone. Earlier and more effective emergency response can 
minimise impact on industries such as fisheries or tourism, thus greatly limiting negative 
social and economic impacts. Given the exposure of those industries to real or perceived 
consequences  of  pollution,  lowering  the  risk  of  accidents  has  strong  benefits  on  the 
sustainability of jobs and life of local communities. 

Legal clarity on the application of EU waste law to oil spilss will help provide assurance 
to the offshore sector, and regulators and will overall increase the level of environmental 
protection.  Moreover,  positive  impact  of  more  efficient  emergency  response  on 
environment is obvious while bringing less self-evident benefits such as better protection 
of  wildlife.  For  example,  many  animals,  especially  bird  species,  are  threatened  by  oil 
spills even when those do not reach the shore. Better emergency plans can prevent more 
negative  effects  as  well  as  address  the  problems  of  oiled  animals  reach  the  shore  long 
before the actual oil spill, thus limiting damage and costs of recovery. 

5.4. 

Option 2  

5.4.1. 

Impact on risk mitigation 

This option activates, mainly, two things that lie beyond previous options. It levels EU 
MS  up  to  the  optimum  best  practices  everywhere  (which  happens  to  comprise  EU  MS 
and  EEA,  rather  than  farther  afield),  and  it  introduces  new  practices  that  are  relatively 

51 

 
modest  additional  costs  and  therefore  attainable.  Option  2,  on  the  other  hand,  would 
make a robust assault on the main problem drivers described in chapter 2. 

Option  2  makes  an  impression  on  all  of  the  problem  drivers  by  incorporating 
environment  risk  assessment  and  emergency  planning  into  major  hazard  reports, 
underpinned  by  inspection  and  sanctions  by  the  newly  joined-up  regulator,  and  by 
Operators  that  are  required  to  adopt  policies  and  corporate  arrangements  leading  to  an 
effective  major  hazards  prevention  culture.  Incorporation  of  environment  risk 
assessments into the major hazards report enables standard operating procedures between 
MS leading to significant improvement in cross border cooperation in emergencies. The 
enhanced  sector  culture  renders  an  improvement  in  verifying  technical  capacity  during 
licensing.  The  EU  Offshore  Authorities  Group  is  established  under  EC  auspices  to  the 
benefit  of  all  MS,  equally,  and  supported  by  obligatory  standard  reporting  for  the  first 
time  across  any  national  borders.  This  enhances  public  scrutiny  and  transparency  and 
facilitates EU regulatory programmes, in agreement with the Member States. 

In view of the above, the levelized annual damage estimate is significantly impacted. It 
can be estimated that, due to significant reduction in losses due to of a major blow-out as 
a  result  of  the  implementation  of  the  policy  option,  the  levelized  costs  for  damage  are 
this  option  alone,  see  Section  3.1  of 
reduced  by  €76.9  -  €343.1  million  annually  (for 
Annex IV). The effect of option 2 cumulatively with Options 1 and 1+, is to lower the 
baseline scenario by €102.7 – 454.7m (or approximately 50%).  

Vicarious effects and omissions of option 2 

The  all  encompassing  regime  for  industry  and  regulators  will  also  move  EU  based 
companies  towards  a  more  consistently  high  standard  wherever  they  operate. 
Cooperation  with  non  EU  neighbours  in  incident  prevention  and  response  would  be 
enhanced by the raised levels of risk awareness and transparency throughout the EU 

This option would not provide for any form of enforcement against operators who do not 
uphold consistent high standards of compliance in every MS they operate, nor would it 
ensure  an  EU  coordinated  response  to  a  major  offshore  incident  that  exceeds  the 
resources  of  the  region  in  which  it  occurs  although  it  would  increase  the  prospects  of 
external aid becoming available quickly. 

5.4.2.  Regulatory and compliance costs 

A  number  of  legislative  measures  would  be  needed  to  implement  the  measures  that 
comprise this option to ensure the policy benefits accrue as designed. 

Firstly,  attaining  industry  best  practices  is  the  outcome  of  industry  demonstrating  a 
strong  safety  culture  across  the  EU.  To  do  this,  operators  and  MODU  owners  must  go 
beyond the process of constructing major hazard reports (option 1) and incorporate their 
major hazards prevention policy within their top corporate policy and in their corporate 
organisation  and  procedures,  supported  by  effective  performance  monitoring,  analysis 
and reviews of effectiveness. Legal intervention needs to be available for serious neglect 
of these principles and therefore a legal instrument is necessary to establish clear duties 
that support the broad generic frameworks of the EU safety and health provisions.    

Further, industry, as a whole, need to identify the priorities in good practices relating to 
major  hazards  prevention  –  for  example  relating  to  maintaining  oil  and  gas  within  the 

52 

 
vessels and pipework designed for their safe handling (referred to as process safety), and 
human and organisational factors that encourage sound judgement and leadership, and so 
on.  

All this will result in an increase in compliance costs for the industry higher than in case 
of  Options  1  and  1+.  Based  on  the  analysis  of  available  industry  data,  including  the 
limited  responses  to  specific  cost  questionnaires  prepared  by  the  Commission  in  the 
course of the present analysis (see Annex VIII) the increase is estimated at €70 million 
annually  (details  in  Section  3.5  of  Annex  IV).  Industry  would  incur  these  costs  for 
extending their risk management and MHR processes to include environmental risks and 
to improve transparency and information sharing under this policy option. 

The  likely  additional  running  costs  to  all  the  public  authorities  from  the  proposed 
policies have been assessed on the basis of an administrative cost survey conducted with 
existing competent authorities in relevant Member States. The analysis of thus collected 
data  and  information  yields  estimates  in  the  region  of  €9.61  –  15.33  million  annually, 
with  one-off  costs  between  €17.75  and  €44.15  m illion  (see  Section  3.5  in  Annex  IV). 
Public authorities would incur the annual running costs mainly for additional resources 
for  inspections,  assessments  of  major  hazard  reports  and  collection  and  sharing  of 
information  provided  by  the  industry.  The  one-off  costs  are  mainly  incurred  for  the 
establishment of Competent Authorities in Member States. The cumulative running costs 
for option 2, including options 1and 1+ are estimated at €133.43-139.15m annually. 

5.4.3. 

Social, economic and environmental impacts 

Option  2  brings  significant  benefits  over  earlier  options  in  terms  of  environmental 
protection  with  the  full  coverage  of  marine  water  damage  under  the  ELD,  but  also  in 
terms of accident prevention. Including the environmental concerns in the major hazard 
report  can  help  minimizing  the  negative  impacts  on  the  environment.  Improved 
transparency  and  sharing  of  information  can  further  improve  quality  of  preventive 
measures as well as effectiveness of emergency response and thus limit negative social, 
economic and environmental impacts described for earlier options. 

Moreover,  resulting  increased  consistency  of  national  regulatory  measures  could  lower 
compliance  costs  of  those  operators  active  in  more  than  one  jurisdiction.  Common 
standards  and  practices  will  also  improve  the  functioning  of  the  internal  market  and 
enhance competition.  

Increased focus on independent verification and quality of offshore major hazard reports 
would also increase opportunities for secondary industries related to offshore operations 
that would be accessible also to SMEs. 

5.5. 

Option 3 

5.5.1. 

Impact on risk mitigation 

the  benefits  produced  by  option  2  and  enhances 

Option  3  consolidates 
the 
implementation of EU law and EU's effectiveness in influencing overseas standards and 
in the performance of EU based companies working elsewhere. It establishes an EU-wide 
intervention  capability  that  is  targeted  on  the  unique  characteristics  of  offshore  oil  and 
gas disasters. On the one hand an EU Agency offers a source of technical assistance to 
new  or  evolving  national  regimes,  promotes  regulatory  coherence,  strengthens 

53 

 
deterrence,  coordination  and  transparency.  On  the  other  hand,  it  could  destabilise 
existing mature regimes (North Sea, Italy) and lead to fewer benefits than in option 1 or 2 
by  introducing  standards  based  on  the  lowest  common  denominator,  creating  potential 
for duplication, and aggravating the shortage of expert, specialist personnel.  

Vicarious effects and omissions of option 3  

An incremental improvement is anticipated in transparency under the auspices of an EU 
agency,  acting  on  both  the  regulators,  and  the  industry.  Investigations  into  major 
incidents by the EU agency would introduce an element of independence that could be 
very  effective  in  establishing  objectivity,  ensuring  lessons  are  learned  by  the  MS 
regulators,  and  in  increasing  public  confidence.  Increased  diligence  of  EU  companies 
operating  outside  the  EU  is  to  be  expected  both  because  of  the  greater  consistency  in 
corporate  performance  within  the  EU,  and  because  of  greater  influence  over  the  long 
term by the EU in global standards.  

On  the  other  hand  if  the  sharing  of  roles  and  responsibilities  between  MS  and  EU 
regulators is not made clear, the efficacy of MS competent authorities, especially in the 
North Sea, could be hampered by delays in responding to events which is a risk inherent 
to both centralised and multi-actor intervention. The likelihood of such problems would 
be reduced if the role of the agency were clear and logical, as is the case with EMSA.  

5.5.2.  Regulatory and compliance costs 

The increase in regulatory costs in Option 3 is higher compared to Option 2 particularly 
due  to  the  additional  costs  for  setting  up  and  operating  a  dedicated  EU  body  (agency). 
These costs can be estimated by using other EU bodies as proxies. The additional costs 
can be estimated at the level of €33.6 m illion in annual running costs and further €17.75-
44.15m  one-off  costs  for  setting  up  the  new  competent  authority  (safety  and 
environment)  plus  an  non-quantified  sum  –    €.tens  of  millions  -  for  purchase  of 
additional  capital  emergency  response  assets  for  the  EU  body  (see  s.4.3  of  Annex  IV). 
However, it should be also kept in mind that there would be a number of non-financial 
obstacles  to  be  overcome  in  establishing  an  EU  agency  with  powers  to  intervene  with 
industry  and  MS.  These  include:  the  relationship  between  the  EU  agency  and  MS 
jurisdictions  for  criminal  investigation  and  prosecution;  cost  recovery  mechanisms;  the 
relationship between MS and the agency in respect of non major hazard regulation; the 
relationship  with  licensing  authorities;  the  handling  of  major  hazards  reports  by  the 
regulator, leading to consents; and in agreeing emergency plans.  

Compliance  costs  for  the  industry  would  not  be  significantly  increased  compared  to 
Option 2 so the estimates developed in that section can be equally used here. Therefore 
the  cumulative  running  costs  for  option  3  including  options  1,  1+  and  2  amount  to 
€167.03-172.75m annually. 

5.5.3. 

Social, economic and environmental impacts 

Further  improvements  in  prevention  of  accidents  would  bring  significant  benefits; 
however, the risk of bringing the focus away from local conditions and needs does also 
mean a potential threat to effectiveness of the adopted measures. A balance would need 
to  be  found  between  EU  and  national  responsibilities  that  would  ensure  that  applied 
policies take account of the specificities and needs of local communities and economic 
and environmental conditions. 

54 

 
6. 

CONCLUSIONS OF IMPACT ASSESSMENT ANALYSES FOR POLICY OPTIONS 

Chapter 2 described the three-fold problem and its drivers. Chapter 3 described general 
and  specific  objectives  for  an  EU  initiative  to  remedy  the  problem  and  introduced  14 
measures that would deliver the objectives by addressing the problem drivers. Three of 
the  measures  (product  safety,  financial  capacity  and  civil  liability)  were  confirmed  as 
important  but  excluded  from  further  assessment  at  this  stage  because  further  policy 
evaluation is necessary. Chapter 4 introduced four policy options beyond the do-nothing 
baseline  option,  each  implementing  a  specific  subset  of  the  measures  implemented 
through  different  means  (guidelines,  legislation,  agency  etc  –  described  in  detail  in 
Annex  XI).  Chapter  5  summarised  the  cost/benefit  impacts  of  the  different  policy 
options, with detailed assessments provided in Annex IV.  

This  chapter  summarises  the  pros  and  cons  of  the  policy  options  in  terms  of  their 
effectiveness in meeting the objectives (Table 4) and their associated costs and benefits 
weighed against the baseline scenario (Table 5). 

Table  6  illustrates  the  increasing  impact  in  terms  of  effectiveness  of  individual 
measures identified in chapters 3 and 4 within the context of the policy options which 
they  deliver.  All  options  produce  beneficial  effects,  and  Option  1+  secures  benefits  in 
terms of liability and sharing compatible response assets. However Options 2 and 3 stand 
out clearly as the most effective overall. 

Table 4 
Assessed effectiveness of policy options 

No. 

Measure 

Option 

Option 

Option 

Option 

Option 

0 

1 

1+ 

2 

3 

4.1.1 

4.1.2 

4.1.3 

4.1.4 

4.1.5 

Detailed verification of the technical capacity 
of potential operator 

Establishing 
penalties regime 

regular 

inspections  and  a 

Submission of formal safety assessments for 
acceptance by the regulator 

Extension  of  MHR  into  a  comprehensive risk 
management model 

Extending 
operations 

EU 

practices 

to 

overseas 

4.1.6 

Establishing a Competent Authority 

4.1.7 

4.1.8 

4.1.9 

Establishing  a  platform 
dialogue 

for 

regulatory 

Comprehensive 
transparency 

information  sharing  and 

Preparedness 
for 
response to major offshore accidents 

effective 

emergency 

4.1.10 

Ensuring 
cross-border 
compatibility of intervention assets 

availability 

and 

4.1.11 

Clarifying the scope of environmental liability 

55 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table legend: 

Extent  to  which  the  aim  of  the 
measure is attained: 

None 

Little/ 

patchy 

Some 

Mostly 

Colour 

How to interpret Table 4 

Option 0 does not impact on the problem drivers consistently across MS. Improvements in cross border 
sharing  of  compatible  assets,  and  in  cross  border  emergency  planning,  are  anticipated  as  a  result  of 
ongoing industry/MS initiatives and research. 
Option 1 secures some progress towards the goal of consistent risk assessment by requiring industry and 
regulators  to  adopt  a  goal  setting  regime  based  around  the  health  and  safety  document  (92/91/EC)  but 
going further. This induces partial improvement in the safety culture of industry. An informal grouping of 
EU  offshore  authorities  is  likely  to  form which, when combined with new information emerging via the 
formal risk assessments, makes available new information for sharing and learning. Upgraded inspection 
and penalties also supports this trend. 
Option  1+  achieves  limited  improvement  in  technical  capability  verification  at  the  licensing  stage.  It 
clarifies  some  aspects  of  liability  of  operators  (application  of  EU  waste  law),  and  formalises  the  goal of 
making  emergency  assets  and  plans  suitable  for  sharing  across  MS  borders.  EU  begins  to  secure  raised 
standards overseas and establishes the principle of EU based companies as ambassadors in this regard. 
Option 2 makes an impression on all of the problem drivers by incorporating environment risk assessment 
and emergency planning into major hazard reports, underpinned by inspection and sanctions by the newly 
joined-up  regulator,  and  by  Operators  that  are  required  to  adopt  policies  and  corporate  arrangements 
leading  to  an  effective  major  hazards  prevention  culture.  Incorporation  of  environment  risk  assessments 
into  the  major  hazards  report  enables  standard  operating  procedures  between  MS  leading  to  significant 
improvement  in  cross  border  cooperation  in  emergencies.  The  enhanced  sector  culture  renders  an 
improvement  in  verifying  technical  capacity  during  licensing.  The  EU  Offshore  Authorities  Group  is 
established  under  EC  auspices  to  the  benefit  of  all  MS,  equally,  and  supported  by  obligatory  standard 
reporting for the first time across any national borders. This enhances public scrutiny and transparency and 
enables  EU  regulatory  programmes,  in  agreement  with  MS.  The  scope  of  water  damage  under  the 
Environmental Liability Directive is extended to marine waters, aligning it with the Marine Directive.  
Option 3 institutionalises and cements the benefits produced by option 2 and enhances EU effectiveness in 
influencing  overseas  standards  and  in  the  performance  of  EU  based  companies  working  elsewhere.  It 
establishes a major intervention capability that is targeted on the unique characteristics of offshore oil and 
gas  disasters.  The  introduction  of  an  EU  Agency  has  a  destabilising  effect  on  existing  mature  regimes, 
especially in the North Sea and Italy leading to a reduction in the benefits accruing to option 2 in respect of 
MS regulatory efficacy and through that on the safety culture of the industry.    

Table  5  displays  the  incremental  costs  and  benefits  after  implementation  of  each 
consecutive  policy  option  from  0  through  3.  They  are  compared  against  the  estimated 
quantifiable  cost  of  the  baseline  option  i.e.  €205-915m  of  levelized,  annual  cost.  In 
practice  all  options  beyond  option  1  would  be  implemented  in  combination  with  the 
previous measures and costs would be incremental – as we show in the table 

The  conclusions  from  this  part  of  the  assessment  indicate  that  that  costs  and  benefits 
increase  hand  in  hand  with  the  complexity  of  the  options.  The  expected  quantified 
benefits start to make a noticeable difference at Option 1+ because all offshore regions 
are affected by this option but mainly because of the positive (though still partial) impact 
it  has  on  liability  and  emergency  response.  The  benefits  accruing  in  option  1+  are 
reinforced  in  Option  2  through  new  law,  and  by  integrating  EU  best  practices  into  a 

56 

 
 
 
 
 
 
 
single model. Option 3 does not improve on the baseline reduction in a way that can be 
quantified, but the increased costs of this option produce the non quantifiable benefit of 
greater assurance that the measures will be implemented as intended, and sustained over 
the long term.   

We  can  express  the  benefit  of  each  option  in  terms  of  its  percentage  reduction  on  the 
baseline cost, which is a surrogate for the baseline risk.56 :.  

• 

• 

• 

• 

0% for Option 0 

3% for Option 1  

12% for Option 1+   

50% for Options 2 and  3.  

56 Formula: (average of benefit range) / (average of baseline range) 

57 

 
                                                 
O
p
t
i
o
n

0 

1 

1+ 

2 

3 

Likely additional 
costs 

No costs anticipated 

Expected impact on 
the est baseline 
damage cost  
( €205 – 915m/year) 
No reduction 
anticipated 

Running costs: 
€35.50m/yr  

Net reduction : 
€6.66 - €29.7m/year 

(3% baseline reduction) 

Additional running 
costs: 
 €18.32m/yr   

Cumulative running 
costs: 
€53.82m/yr 

Additional reduction: 
€17.85-79.3m/yr 

Net redn inc option 1   
€24.5 - €109.0m/yr 

(12% baseline redn)  

Additional running 
costs: 
€79.61 -  €85.33m/yr 
Cum. running costs: 
€133.43-139.15/yr 
One-off costs: 
 €17.75 - €44.15m  
Additional running 
costs: €33.6 million 
Cum. running costs: 
€167.03-172.75/yr 
One-off costs: 
 €17.75-44.15m/yr + 
€10s millions capex 

Additional reduction: 
€78.2 – €345.7m/year 

Net redn inc opt 1,1+ : 
€102.7-454.7m/yr 

(50% baseline redn) 
Consolidation of 
benefits realised in 
option 2 

(remains at 50% 
baseline redn) 

Non-quantifiable impacts 

Benefits (limited to North Sea area): 
- implementation of ongoing (partial) improvement measures; 
- incremental improvement in ER; 
Costs: 
- increased risk due to 'frontier' and complex operations. 
Benefits: 
- reduced losses from future operations in the Mediterranean/ Black Sea from levelling up standards & best practices. 
Costs: 
- falls to operators in the Mediterranean and Black Sea; 
- one-off cost for authorities changing from prescriptive to goal-setting regime. 
Benefits: 
- increased efforts from operators via legal clarity on the application of EU waste law to oil spills; sharing of intervention assets and 
coordination of contingency plans 
- incremental improvement in technical capacity of smaller operators applying for licenses 
- extending EU standards overseas. 
Costs: 
- lost earnings by smaller companies unable to meet technical capacity requirements; loss of some offshore sector jobs 
- lost tax revenues to MS due to non-development of resources; 
- modest admin burdens for MS due to sharing of ER assets, coordinating ER plans. 
Benefits: 
- increased quality of ER plans within MHR due to approval of major hazards report (MHR); 
- more effective oversight by independent Competent Authorities; 
- greater awareness of hazard trends due to improved transparency and information sharing 
- polluter pays principle applies to water damage in marine waters. 
Costs: 
- start up costs for new legal provisions 
Benefits: 
- more effective emergency response/EU intervention capacity   - more effective monitoring of compliance with EU law; 
- more consistency in assessment of license applications;            - independent oversight of national regulators and 3rd party verifiers 
- improved application of best practices in overseas operations 
Costs: 
- loss of initial stability in MS;                                                      - start up costs in MS for aligning with new agency 

Table 5 – summary of the impacts estimates

58 

 
 
 
 
 
 
 
 
 
7. 

PREFERRED POLICY OPTION AND LEGAL INSTRUMENT 

This chapter presents the preferred policy option and the preferred legal instrument that 
this impact assessment supports. The choices have been made bearing in mind the annual 
levelised  cost  of  the  baseline  option  at  €205- 915m,  high  fragmentation  of  the  sector  in 
the  EU  and  the  risk  analysis  concluding  that  in  the  remaining  lifetime  of  its  offshore 
sector, Europe will experience another offshore major disaster. 

7.1. 

Preferred option 

The preferred policy option is Option 2. i.e. a comprehensive offshore reform raising, 
through new law, the North Sea standard up to current best practises and providing for 
greater transparency of performance of industry and regulators. 

This  option  can  in  the  most  decisive  manner  reduce  the  baseline  risk  of  offshore 
incidents in EU waters (50%) – expressed both in terms of likelihood and consequence of 
occurrence.  Importantly,  it  introduces  the  major  hazard  risk  model  enhanced  with  the 
environmental aspects – a priority element of the EU initiative. While on par with Option 
3  on  these  two  accounts,  the  analysis  concludes  that  Option  2  is  more  affordable 
administratively  and  a  more  proportionate  means  to  address  the  baseline  problems.  In 
fact Option 3 is politically and financially considerably more challenging to implement 
than Option 2 – much due the fact that it introduces a new regulatory body.  
Option  1+  would  be  a  modest  choice  achieving  a  modest  impact  (ca  12%)  on  the 
objectives  while  offering  modest  enforcement  possibilities  (largely  soft  law)  and  little 
resistance  for  change  from  conservative  stakeholders  such  as  notably  the  industry.  The 
entry level Option 1 although administration and industry operating costs are small, the 
risk reduction is insufficient to justify action.   

7.2. 

Implementing measures for Option 2 

As explained briefly in Chapter 4 and in more detail in Annex XI, Option 2 comprises a 
comprehensive programme of reforms most of which is introduced through a legislative 
instrument and partly also through soft law. : 
The following measures are proposed to be incorporated in the new legal instrument:  

• 

• 

• 

detailed verification of operating technical capacity at the licensing stage, acting on 
the Directive 94/22/EC; 
establishing regular inspections and penalties regimes, with details to be established 
in consulting with Member States experts] 
requiring the preparation of a Major Hazard Report along the lines required under the 
Directive  92/91/EC,  but  including  environment  risk  assessment  and  internal 
emergency  planning  locally  (installation  specific)  and  submission  of  the  report  for 
acceptance  by  the  regulator;  incorporating  major  hazards  prevention  policies  at 
corporate board level; and establishing formal priorities for producing new guidance 
and standards for industry. The Commission will seek advice of Member States and 
industry experts on the details.  

•  Establishing a competent authority (CA) in each jurisdiction for joined-up regulation 
of major hazards regarding environment and safety, along the Seveso model. Design 
standards for the CA would be determined by comitology (Member States) 

59 

 
•  Establishing  a  EU  offshore  authorities  group  (EUOAG).  Details  of  remit  and 
organisation  could  to  be  discussed  with  Member  states  experts  considering  models 
such as the SLIC Directive. 

•  Establishing  a  standard  reporting  system  from  industry  to  Member  States,  and 
subjective  provisions  for  sharing  information  with  the  EU  and  the  general  public 
(transparency).  

•  Preparedness for effective cross-boundary emergency response, linking external 

emergency response plans (i.e. national plans) to operators internal emergency plans 
in the MHR. Member states to contribute through comitology in developing standard 
operating procedures. 

•  Ensuring cross border availability of compatible response assets; Member States and 

industry to advise on the details for inventory sharing and for progressively 
upgrading the degree of compatibility including in human expertise. 

•  Amending the scope of the Environmental Liability Directive in line with the Marine 
Strategy  Framework  Directive,  in  relation  to  water  damage  for  marine  waters  (in 
addition  to  clarification  of  producer  responsibility  for  waste  generated  by  offshore 
exploration  and  production  activities  based  on  the  provisions  of  Directive 
2008/98/EC on waste, as part of a Frequently Asked Questions documents prepared 
for the Directive). 

These  measures  comprise  the  skeleton  of  a proposed new legal  instrument  for  offshore 
safety. It will be complemented by a soft law instrument such as guidelines to incentivise 
voluntary application of EU best practices by EU based major companies when operating 
overseas. 

The  following  diagram  (Diagram  3)  is  an  illustration  of  the  practical  logic  behind  the 
implementation of option 2.  

Firstly  (green  boxes)  the  Member  States  and  industry  establish  a  framework  for  best 
practice  in  operations  and  regulation,  e.g.  Member  State  licensing  authority  appointing 
licensees with appropriate technical capability and safety policy, Member State appoint 
competent  authority(CA),  Commission  appoints  EU  offshore  authorities  group 
(EUOAG)  from  CA’s.  CA’s  and  licensees/operators  prepare  policies  and  establish 
implementing  arrangements.  Industry/EUOAG  implementation  priorities  for  revised 
standards and guidance. 

Secondly  (orange  boxes)  operators  and  CA’s  undertake  activities  in  line  with  policies 
and  arrangements,  including  major  hazard  reports  incorporating  environment  risk 
assessments  and  related  installation  based  emergency  response  plans  which  are 
assessessed/consented by CA, and which form the basis of inspection sand enforcement. 
Member  States  national  emergency  response  plans  prepared  in  consideration  of 
installation emergency response plans. 

Finally  (red  boxes)  CA’s  Member  States  and  industry  respond  to  events  during 
operations – emergency response, investigation and reporting. EUOAG share lessons and 
experience.  CA’s  advise  Commission  who  publish  periodic  reports,  supported  by 
EUOAG.      

60 

 
 
 
 
 
 
Diagram 3 

Logic model for the practical operation of option 2 

1. Establishing best practices for licensing by MS, safety/environment regulator and industry 

Member States consider safety policy and relevant 
well operations expertise at the time of awarding 
exploration and production licenses 

Member States appoint Competent Authority (CA) and 
provide adequate resources to regulate offshore safety 
and environmental protection 
EC amends ELD to extend full liability for water damage to MSCS' beyond territorial seas line 
EU Offshore Authorities Group is established (by EC) comprising EUMS and EEA with 
offshore activity or pending activity

Operators prepare corporate safety policy for major 
hazard prevention and mitigation; also prepare 
detailed safety management systems SMS) and set 
up scheme for independent verification. 

CA establishes policies and procedures for offshore 
regulation including assessment and acceptance of 
MHR; inspection; investigation; enforcement; research 
and continuous improvement 

Operators and EUOAG agree and implement priorities for new/revised standards and guidance 
for offshore major hazards prevention
Operators and EUOAG agree and implement standard data reporting system for EU offshore 
oil and gas
Operators commit to upholding EU-standards to maximum allowable extent when operating 
outside EU
2. Securing best practices during actual operations in licensed areas 

Well operators prepare well plan and submit 
notification document to CA >14 days before 
starting operations. To include internal emergency 
response plan 

CA reviews well notification and takes any 
necessary measure to secure amendment or prohibit 
the planned well. Otherwise operator continues as 
planned 

Operator or rig owner prepares relevant type of major 
hazards report (MHR) and submits it to CA ahead of 
specified time depending on type of MHR. To include 
internal emergency response plan 

CA makes assessment of MHR necessary for acceptance 
or declines to accept. Operator proceeds accordingly to 
operate, withdraw or resubmit MHR 

CA makes any necessary notification to countries that may be affected by the planned 
operation (well operation, or production)
MS to prepare new or amend existing external emergency response plans 

Operators compile and submit inventories of 
emergency response equipment. Aim for 
interoperability and compatibility with other 
companies and the MS 
Operations commence. Operator complies with well 
plan/MHR, other applicable regulations, , his 
corporate policy and SMS, all applicable standards 
& guidance 

MS compiles inventories of interoperable and 
compatible equipment and expertise and shares with 
adjacent MS 

CA implements inspection plans, investigates incidents 
and takes necessary enforcement action for breaches of 
regulatory duty 

3. Emergency response, investigation, reporting and transparency 

Operator reports incidents and other events and 
information to CA in line with common reporting 
format 

MS routinely publishes reports on performance of the 
oil and gas sector 

EC publishes reports of EU safety and environmental protection performance based on MS 
submitted reports

In the event of a major incident, operator activates 
internal emergency response plan, notifying MS as 
required and necessary 

Where necessary, MS activates external 
emergency response plan, advising EC and 
neighbouring MS where necessary. 

CA conducts major incident investigation and reports findings to EC 

EUOAG promotes sharing of information and 
development of standards and guidance by the 
industry 
Supports MS in conducting x-boundary emergency 
exercises 

EC publishes reports of x-EU performance of the 
offshore oil and gas sector. 
Supports MS in conducting x-boundary emergency 
exercises 

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The following diagram (Diagram 4) illustrates the effect and interfaces of the proposed 
legal instrument with existing EU legislation relevant to oil and gas offshore activities. 

The  preferred  policy  option  for  the  implementation  of  the  first  two  categories  of 
measures  can  be  pursued  jointly  through  a  package  of  measures  consisting  of  soft-law 
actions,  international  initiatives  and  a  legislative  proposal.  The  general  structure  of  the 
intended legislative proposal is expressed in expressed in the flow diagram below. 

This  legislation  will  be  meant  to  complement  the  existing  regulatory  framework. 
Diagram 1 used in chapter 2 for the visualization of the currently applicable legislation 
can be accordingly amended to provide the following contextualized picture: 

Diagram 4  
Effect of option 2 on the existing legislative framework for offshore 

As regards the most appropriate form of the legislative proposal, a Regulation seems to 
bring important benefits over a Directive. A regulation seems to be an appropriate legal 
form  also  taking  into  account  its  advantages  with  regards  to  its  speed  of  application, 
efficient  implementation  at  the  EU-level  and  clarity  and  consistency  through  direct 
application57.  Given  the  urgency  for  an  EU-action  to  establish  a  common  minimum 

57 It is worth noting, that in comparison with other major legal acts relevant for high risk industries, one 
can detect certain preference for Directives, such as IPPC Directive or SEVESO II Directive. However, in 
contrast to broad, horizontal sectors such as chemical industry, other high risk sectors with more narrow 
scope, such as civil aviation, often use Regulation for their legal framework. 

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safety level in a precise activity field of offshore prospection, exploration and production 
of oil and gas, the principles laid down in a Regulation would be applicable to all actors 
concerned while delegated/implementing acts would be developed in areas where more 
detailed  requirements  need  to  be  set.  By  obliging  directly  also  the  industry,  the 
Regulation  would  also  increase  clarity  and  provide  for  a  level  playing  field.  The 
arguments for direct application are even stronger as regards emergency plans, especially 
in connection with potential transboundary effects of offshore accidents. 

7.3. 

Preferred form of legal instrument 

A Regulation is considered as the most appropriate legislative instrument to implement 
the preferred policy option. It has advantages over a Directive with regard to its speed of 
application, efficient implementation at the EU-level and clarity and consistency through 
direct  application57.  Given  the  need  rapid  EU-action  to  establish  a  common  minimum 
safety level in a precise activity field of offshore prospection, exploration and production 
of oil and gas, the principles laid down in a Regulation would be applicable to all actors 
concerned  while  a  delegated  or  implementing  act  could  be  developed  to  establish  or 
maintain  detailed  requirements  in  certain  areas  (such  as  the  standard  reporting  format.. 
By acting directly on the industry, the Regulation would also increase clarity and provide 
for  a  level  playing  field.  The  arguments  for  direct  application  are  even  stronger  as 
regards emergency plans, especially in connection with potential transboundary effects of 
offshore accidents. 

8. 

MONITORING AND EVALUATION  

The proposals aimed at improved transparency and comparable reporting will allow the 
Commission  to  monitor  and  evaluate  progress  towards  meeting  the  objectives  and  to 
compare this progress across Member States. In this context, the trends of the following 
safety performance indicators will be particularly informative: 

•  Number of major accidents (e.g. collisions, fires, well control losses) and near-misses 

and major causes; geographical location/ regional distribution of the accidents 

•  Number and volume of accidental releases of hydrocarbons 
•  Number of fatalities and injuries. 

Of  course  these  indicators  have  to  be  compared  to  the  scope  of  operations  (e.g.  total 
hours worked, oil and gas produced, number of installations, number of wells drilled) in 
order to gain comparable figures across years and across Member States. 

Data  related  to  the  compliance  verification  activities  of  public  authorities  are  also 
important indicators. These may include information on: 

•  The handling of authorization requests; 
•  Inspections; 
•  Major compliance breaches; 
•  Sanctions. 

Improved transparency will serve not only the Commission. It will also make it possible 
for  the  general  public  to  find  accessible,  reliable  and  comparable  information  on  the 
offshore activities and their regulation in various EU regions. This should help the public 
acceptance  of  offshore  oil  and  gas  activities  in  European  waters  by  demonstrating  that 

63 

 
 
the  risks  they  carry  to  life,  environment  and  property  are  appropriately  managed  and 
controlled. 

In addition to reporting by Member States, regular meetings with the competent national 
authorities will also allow the Commission to monitor the development of offshore safety 
in Europe by the exchange of experience and views on matters relevant for regulation of 
offshore operations. 

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