UK Deepwater Drilling - Implications of the Gulf of Mexico Oil Spill - Energy and Climate Change Contents

Memorandum submitted by the UK Oil Spill Prevention and Response Advisory Group (OSPRAG)


  1.1  The Oil Spill Prevention and Response Advisory Group (OSPRAG) has been convened as a proactive initiative to review oil spill prevention and response arrangements in the UK and ensure they continue to be fit for purpose and enhanced where appropriate. OSPRAG comprises senior representatives from relevant UK regulators, the trade unions, the directorate and individual members of Oil & Gas UK, including oil companies and drilling contractors, and seeks to identify and address cross industry issues arising from the Gulf of Mexico incident in the UK continental shelf (UKCS).

  1.2  OSPRAG has also established active liaison with European, American and international regulatory, technical and industry bodies and acts as a communications focal point for sharing information across the UK offshore oil and gas industry.


  2.1  The oil and gas industry has a long history of safe drilling operations in the UK with 11,000 wells drilled in total over the last 40 years (Source: DEAL).

  2.2  The oil and gas industry on the UKCS is controlled by a rigorous environmental and safety regulatory regime, the latter being built upon the recommendations of the Cullen Inquiry into the Piper Alpha incident in 1988.

  2.3  The UK safety regime is fundamentally different to that in the USA with a clear separation in regulatory function between licensing (Department of Energy and Climate Change) and safety (Health & Safety Executive). A goal setting rather than prescriptive philosophy is delivered through the safety case to ensure that major accident risks are evaluated and controlled. Furthermore, the safety case regime obliges the UK industry to review its existing arrangements in the light of new information (eg the Macondo incident).

  2.4  The offshore oil spill strategy is intended to provide an effective response in the seas of the UKCS, utilising the energetic nature of the UK marine environment together with the application of chemicals to enhance this natural dispersion, when necessary.

  2.5  The Gulf of Mexico incident obliges the industry to reconsider the worst case scenarios and demonstrate to the satisfaction of all its stakeholders that it is competent to drill all targeted reservoirs on the UKCS and has the capacity to respond effectively to a loss of well control and to any resultant oil spill. OSPRAG aims to fulfil this requirement.

  2.6  It should be noted that whilst the primary responsibility for oil spill response rests with the licensed operator, the Maritime and Coastguard Agency (MCA), through the Merchant Shipping Act (Section 293), has powers to assume control of "at sea" counter pollution operations. The Offshore Installations (Emergency Pollution Control) Regulations 2002 give the Secretary of State for Energy and Climate Change the power to intervene in an incident involving an offshore installation where there is, or there may be, a risk of significant pollution. These provisions are reflected in the National Contingency Plan (NCP). MCA is taking an active role in OSPRAG to ensure that any recommendations made are consistent with the NCP.

  2.7  Work within OSPRAG is proceeding in advance of the publication of the investigation into the Gulf of Mexico incident but will ultimately be informed by the findings. It is important that OSPRAG be given the space to deliver and its recommendations not be pre-empted.

  2.8  The remit of OSPRAG is to review and make recommendations to support the provision of adequate response mechanisms for the UKCS. However, it should be recognised that some elements of the response could be developed as a result of work undertaken by other international bodies and groups with whom OSPRAG is in contact (see Section 3.6.4 below).


  3.1  As the scale and potential ramifications of the Gulf of Mexico incident became clear, Oil & Gas UK initiated the establishment of OSPRAG, with the inaugural meeting held on 2 June.

  3.2  Building on a successful collaborative model previously used by the UK industry to establish Step Change in Safety and the Helicopter Task Group, the OSPRAG membership consists of senior representatives from organisations with a legitimate interest in the objectives of the group.

  3.3  The membership currently consists of Mark McAllister, Fairfield Energy Limited (Chair); Department of Energy and Climate Change (DECC); Health & Safety Executive (HSE); the Secretary of State's Representative for Maritime Salvage and Intervention (SOSREP); Maritime and Coastguard Agency (MCA); Unite; RMT; KCA Deutag Drilling Limited; Transocean Drilling UK Ltd; International Association of Drilling Contractors (IADC); Oil Spill Response (OSR); BG Group plc; BP Plc; Chevron Upstream Europe; CNR International (UK) Limited; ConocoPhillips (UK) Limited; ExxonMobil International Ltd; and Total E&P UK Limited. A representative of the EU Energy Commission also attends as an observer, while a similar invitation has been extended to the Norwegian Ministry of Petroleum and Energy. The Oil & Gas UK Chief Executive and Policy Directors provide support to the group.

  3.4  The agreed remit of OSPRAG is to:

    — Review UKCS regulation and arrangements for pollution prevention and response;

    — Assess the adequacy of financial provisions for UKCS response; and

    — Monitor and review information from the Deep Water Horizon incident and facilitate implementation of pertinent recommendations.

  3.5  OSPRAG meets every four weeks to oversee and steer the work of four review groups established to undertake the reviews and assessments, as well as act upon any recommendations which may arise either from the Gulf of Mexico investigations or the work of the review groups.

  3.6  The four review groups meet frequently to identify short and long term recommendations to be implemented on a cross-industry basis. These are:

    3.6.1 Technical—reviewing relevant aspects of well design, examination and control in the context of preventing loss of control. Representation is from DECC, HSE, Oil & Gas UK, offshore operators, drilling contractors and offshore unions. Sub groups are assessing:

    — Well capping and containment;

    — Well examination, verification and primary well control;

    — BOP inventory & recommendations for improvements;

    — Competency, behaviours and human factors; and

    — Flowing well status.

    The Technical Review Group is preparing a report with final recommendations and a forward plan for implementation for OSPRAG approval. This will include the proposals regarding capping and containment options being developed by Wood Group Kenny and is due at the beginning of October.

    3.6.2 Oil Spill and Emergency Response—reviewing spill response capability and industry co-ordination with National Contingency Plan. Representation is from DECC, MCA, Oil & Gas UK, offshore operators, drilling contractors, oil spill response specialists and environmental agencies. Sub groups have been established to undertake the work necessary to ensure that:

    — Oil spill models are fit for purpose for all release scenarios;

    — Data for offshore and onshore sensitivities are up to date and fit for purpose;

    — Data resources are common and readily accessible for use in contingency planning and during a response;

    — Response resources are sufficient, maintained and deliverable;

    — Oil Pollution Emergency Plans are fit for purpose for all operations; and

    — A comprehensive response exercise is held during 2011.

    3.6.3 Indemnity and Insurance—reviewing liability, indemnity and insurance provisions that would be invoked in the event of a spill. Representation from DECC, MCA, Oil & Gas UK, OPOL and offshore operators. The group is assessing:

    — Financial and administrative arrangements currently in place in the UK;

    — Future requirements; and

    — Adequacy of the OPOL financial responsibility levels.

    A recommendation by OSPRAG to raise the level of the limit for third party costs from $120 million per incident to $250 million has been approved by OPOL. This figure will be reviewed in the light of the outcome of spill scenarios currently being modelled. See Section 4.5.3 for further information about OPOL.

    3.6.4 European Issues—acts as an information sharing and communications focal point, to ensure other relevant bodies are well informed of the work of OSPRAG, and vice versa. Representation is provided from HSE, Oil & Gas UK, international oil and gas trade associations, national regulators and trade associations from other European oil and gas provinces.

    The group has the role of ensuring that:

    — The work of OSPRAG is coordinated with activities taking place elsewhere in the world; and

    — Links with other European National Oil Industry Associations (NOIAs) as well as OGP (International Association of Oil & Gas Producers) through the Global Industry Response Group, IPIECA (the global oil and gas association for environmental and social issues) and the API (American Petroleum Institute) are established and maintained.

  3.7  As a direct result of the effective regulatory regime there has been a marked improvement in the offshore oil and gas industry's overall safety and environmental performance over the past twenty years. Oil spills that do occur are small and do not have a significant environmental impact. For example, in 2008, from a total production of approximately 66,212,848 tonnes of oil, 36 tonnes were spilled (Source: DECC).

  3.8  However, we must always ensure we put the safety of our employees first and minimise any adverse environmental impacts of the industry's operations, so in light of the recent Gulf of Mexico incident, it is only right that the UK offshore sector take a fresh look at its practices in the UK for oil spill prevention and response. The review being conducted under OSPRAG will be comprehensive and will help ensure that the arrangements in the UK continue to be fit for purpose.

4.   What are the implications of the Gulf of Mexico oil spill for deepwater drilling in the UK?

  4.1  The robust regulatory regime in the UK and the resultant industry performance indicate that risks continue to be effectively managed.

  4.2  However, the scale of the Gulf of Mexico incident changed perceptions of risk which has resulted in greater scrutiny of company internal procedures and of how the UK regulatory regime is enforced (eg DECC has doubled the number of environmental inspections offshore).

  4.3  The Macondo incident has obliged the UK oil and gas industry to review comprehensively the adequacy of its prevention (primary and secondary well control) and response arrangements, from well design through to oil spill cleanup, so that they remain fit for purpose and operations to maximise recovery of hydrocarbons from the UKCS can be safely pursued with minimum adverse environmental impacts.

  4.4  OSPRAG was established as a cross-industry initiative to deliver this assessment, while absorbing and applying relevant lessons learned from incidents elsewhere in the world.

  4.5  OSPRAG's initial focus is on:

    4.5.1 The Technical Review Group's work on primary and secondary well control including competency/behaviours and human factors, well examination, verification and blow out preventers. This work concludes that there is a high degree of confidence in the UK regulatory regime and that it drives the right safety and environmental behaviours. Recommendations are being developed to ensure the capture and transfer of best practice in these areas.

    4.5.2 The potential design and delivery of a capping and containment capability for the UKCS. The Technical Review Group will make recommendations on this by the end of September for approval in early October.

    4.5.3 The ability of an operator to pay third party response costs and compensation to those affected by an oil spill. Companies in the UK are responsible for environmental or other damage if their installations fail. There is no legislative cap on a company's responsibility for clean-up and compensation. However, if there is a default on payments, under a mutual agreement established in 1975, administered by OPOL (Offshore Pollution Liability Association Ltd), the rest of the industry will step in to pay third-party costs up to a pre-determined limit. The OPOL Board agreed mid-August to increase this limit to $250 million, which is sufficient to cover the third party costs of an oil spill in previously modelled spill scenarios. All operators on the UKCS are members of OPOL.

    OSPRAG's Indemnity and Insurance Review Group is continuing work on two fronts. Currently under OPOL all operations are seen to pose a similar risk but clearly the financial risk of oil spill from a southern sector gas well is different to that from a northern sector oil well. The review group will make recommendations on any further changes once the implications have been properly assessed.

    4.5.4 The ability of the UK to respond to a sustained oil release. The UK oil spill strategy is based on a tiered response:

    — Tier 1: A small operational spill (< 100 tonnes) employing local resources during any clean up, provided by the operator;

    — Tier 2: A medium sized spill (~ 500 tonnes) requiring regional assistance and resources, provided by a service company; and

    — Tier 3: A large spill (> 10,000 tonnes), requiring national assistance and resources. The National Contingency Plan will be activated in this case.

    The industry sponsored provider of the Tier 3 response, Oil Spill Response, is based in Southampton and can call on resources from other oil producing regions to supplement UK equipment stockpiles. This resource can be supplemented by nationally held equipment under the control of the MCA. An inventory of all oil spill response equipment held in the UK by government agencies and industry is being prepared, against which an assessment of adequacy can be made. In addition, a comprehensive oil spill exercise, led by MCA, is being planned for mid 2011 to test the response provisions.

5.   To what extent are UK safety and environmental regulatory regimes fit for purpose?

5.1  Safety

  5.1.1  OSPRAG believes that the UK regulatory safety regime is robust and fit-for-purpose. The regime was built upon the recommendations of the Cullen Inquiry into the Piper Alpha incident in 1988 and as a result is fundamentally different to that in the USA.

  5.1.2  Firstly there is a clear separation in regulatory function between licensing (DECC) and safety (HSE), which allows the economic goal of maximising recovery of hydrocarbons to remain distinct from the enforcement of safe operations.

  5.1.3  Second, a goal setting rather than prescriptive philosophy (as seen in the USA) is delivered through the safety case to ensure that major accident risks are evaluated and controlled and that precautions taken are tailored to the actual risks. This also allows new technology which enhances safety to be introduced as it becomes available without having to change the law.

  5.1.4  The safety case, accepted by the HSE, is required for all installations before operating (including drilling) on the UKCS. For the safety case to be accepted, it needs to demonstrate that the company management system is adequate to ensure legal compliance; that there are arrangements in place for auditing the safety management system; that there has been a detailed and systematic approach to the identification of all hazards with the potential to cause a major accident, and that all the major accident risks have been evaluated and measures taken to control those risks to as low as reasonably practicable. Furthermore, as new information or safety enhancing technology becomes available, the UK industry is obliged under the safety case regime to review existing arrangements so that risks remain as low as reasonably practicable.

  5.1.5  Specific safeguards for wells:

    — Well notification system—in which the HSE is advised at least 21 days in advance of drilling or well intervention activities. This allows HSE specialist wells inspectors to review the well design and execution plan, and require amendments if necessary;

    — The requirement for the design and construction of a well to be examined by an independent and competent person (an experienced drilling engineer, for example);

    — Verification by an independent competent person (Lloyds or DNV, for example) of the initial suitability and continuing good repair and condition of safety-critical equipment involved in drilling (blow-out preventers, for example);

    — Weekly drilling reports sent by operators to HSE, enabling HSE wells specialists to identify and respond to changing risks;

    — Requirements that workers involved in well operations are suitably informed, instructed, trained and supervised; and

    — Specialist inspectors from HSE's Offshore Division test the veracity of the information received through their prioritised inspection and intervention programmes.

5.2  Environment

  5.2.1  The UK offshore industry is subject to stringent international, EU and UK environmental controls, which lay down the requirements for consents, permits and environmental reporting (as well as the limits for discharges and emissions), inspection, investigation and enforcement. Central to this is the requirement for all operators to have an independently verified Environmental Management System in place, which ensures that appropriate control measures are applied.

  5.2.2  The regulations require every offshore operation, including exploration drilling to have an Oil Pollution Emergency Plan (OPEP), approved by DECC in consultation with specialist advisers. These are: tailored to location and the environmental and socioeconomic sensitivities within a potential impact area; updated, as required; and exercised periodically. Specific spill response is provided by specialist contractors from common resources, supported by additional local resources where required. Response personnel are appropriately trained through accredited courses.

  5.2.3  These operations are subject to inspection by DECC, which recently announced increased resourcing for this area.

6.   What are the hazards and risks of deepwater drilling west of Shetland?

  6.1  In large part, the hazards of drilling west of Shetland are no different from elsewhere. Differences when compared to the North Sea are primarily related to the challenges of the area's physical environment, which is characterised by heavy seas, fast and complex currents, severe weather, particularly in winter, and deeper waters than are typically encountered elsewhere on the UKCS.

  6.2  The risks associated with these hazards are however well understood and, with over 40 years of experience in UK offshore operations, are well managed under a fit-for-purpose regulatory regime and an effective safety culture with multiple barriers in place.

  6.3  In total, more than 400 wells have been safely drilled west of Shetland over the last 30 years, while the Foinaven and Schiehallion fields have been successfully producing for over ten years and Clair for five years, without any significant oil spill incident (Source: DEAL).

  6.4  The industry has a good safety and environmental record on its drilling operations in the region, reinforcing the view that the processes, procedures and control practices employed in the UK for deep water drilling and production are safe and fit-for-purpose.

September 2010



  The group is chaired by Mark McAllister, chief executive of Fairfield Energy Limited. The following also participate in OSPRAG.


    — Drilling contractors.

    — Oil and gas operators.

    — International Association of Drilling Contractors (IADC).

    — Oil & Gas UK.

    — Oil Spill Response (OSR).


    — Department for Energy and Climate Change (DECC).

    — Health and Safety Executive (HSE).

    — Maritime and Coastguard Agency (MCA).

    — Secretary of State's Representative for Maritime Salvage and Intervention (SOSREP).


    — RMT.

    — Unite.

  In the course of the group's work, it liaises with and consults other relevant bodies, some of which are listed below.

    — American Petroleum Institute (API) through the Gulf of Mexico Joint Industry Task Force.

    — International Association of Oil and Gas Producers (OGP) through the Global Industry Response Group.

    — IPIECA (the global oil and gas association for environmental and social issues).

    — European national trade associations: OLF (Norway); Nogepa (the Netherlands), WEG (Germany); IOOA (Ireland); the Danish Operators.


  OSPRAG's work is carried out through four review groups. Representatives from the following organisations participate in the review groups.


    — Talisman Energy (UK) Limited.

    — Oil & Gas UK.

    — Senergy Oil & Gas Limited.

    — HSE.

    — RMT.

    — Unite the Union.

    — BP.

    — OED Norway.

    — Total E&P UK Limited.

    — KCA Deutag Drilling Limited.

    — Transocean Drilling UK Limited.

    — DECC.

    — Apache North Sea limited.

    — ConocoPhillips (U.K.) Limited.


    — Oil & Gas UK.

    — Enquest.

    — BP plc.

    — Shell U.K. Limited.

    — MCA.

    — DECC.

    — BG Group plc.

    — Reed Smith.

    — OPOL Ltd.

    — Endeavour Energy UK Limited.


    — Petrofac Training.

    — Morlich Services.

    — Transocean Drilling UK Limited.

    — Energy Environment.

    — Hess Limited.

    — DECC.

    — Oil Spill Response.

    — Fisheries Research Services (FRS) Marine Laboratory.

    — Oil & Gas UK.

    — JNCC.

    — Briggs Environmental.

    — Maersk Oil UK Limited.

    — BP Plc.

    — MCA.

    — Shell U.K. Limited.

    — Talisman Energy (UK) Limited.

    — Premier Oil plc.

    — Dong (UK) Ltd.

    — CNR International (U.K.) Limited.

    — Nexen Petroleum (U.K.).

    — Total E&P UK Limited.

    — ExxonMobil International Ltd.

    — Marine Management.

    — Kingston Ambrose Ltd.

    — Chevron Upstream Europe.

    — Scottish Coastal Forum.

    — ConocoPhillips (U.K.) Limited.

    — Marathon Oil U.K. Limited.


    — Apache North Sea limited.

    — Nexen Petroleum (U.K.).

    — IADC.

    — OLF.

    — Oil & Gas UK.

    — ConocoPhillips (U.K.) Limited.

    — WEG.

    — NOGEPA.

    — BG Group plc.

    — DECC.

    — MCA.

    — HSE.

    — Petro-Canada UK Limited.

    — Tullow Oil UK Limited.

    — ITF.

    — Hess Limited.

    — Perenco (UK) Limited.

    — Chevron Upstream Europe.

    — IPIECA.

    — Norwegian Petroleum Directorate.

    — Maersk Oil UK Limited.

    — GDF SUEZ E&P UK Ltd.

    — Marathon Oil U.K. Limited.

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Prepared 6 January 2011