New European standards for oil and gas installations could undermine UK operations, industry says

New legislation (56-page / 146KB PDF) proposed at EU level will ensure that the highest safety standards applicable in some countries would become mandatory across all 27 member states, the European Commission said. Oil and gas companies would also be fully responsible for any environmental damage as a result of their operations.

However Malcolm Webb, chief executive of industry body Oil and Gas UK, warned against handing over control of the UK's "fully fit for purpose" regulatory regime to the EU.

"Relinquishing regulatory control to the EU, which has no established competence in this matter and where only three out of the 27 member states have an offshore oil and gas industry of real scale, risks undermining safety and environmental performance here in the UK," he said.

He suggested that the Commission adopt a directive instead of blanket regulation, allowing member states to transpose a higher standard into their own national laws.

Almost half of the nearly 1,000 offshore oil and gas installations in operation in the EU are in the UK, according to Commission figures. There are 181 installations in the Netherlands, 123 in Italy and 61 in Denmark. There are nine other states with either a minimal offshore oil drilling presence or where licenses to do so have been awarded.

The proposed law extends liability for environmental damage to all offshore operations for which member states have responsibility. Previously only installations in coastal waters, defined as within 12 nautical miles from shore, were considered subject to European water damage laws.

The new geographical zone will instead extend 370km from shore, the Commission said. National licensing authorities will have to make sure that only those operators who can commit to high safety and environmental standards are allowed to explore for and produce oil and gas within the geographical zone.

Companies seeking to exploit oil and gas will have to prepare a mandatory hazard report before any exploration or production begins. This report, which must contain a risk assessment and emergency response plan, must be submitted to the national licensing authority for approval. The authority will also have to verify an installation's safety and environmental standards and any emergency provisions.

Operators will also have to submit to regular inspections from an independent third party for any "technical solutions" it adopts to guarantee safety on the installation, the Commission said.

The oil and gas industry will be responsible for the clean-up and property damage costs of major accidents in EU waters, which are in the range of €205 - €915 million per year according to Commission estimates. Member states will cover the costs of establishing national licensing authorities, it said.

Member states will be able to take enforcement action and impose penalties on companies which do not respect the minimum standards under the new law, which was drafted following the highly publicised BP oil spill and explosion in the Gulf of Mexico last year.

"Offshore accidents do not know borders. If a similar accident to the Gulf of Mexico were to happen in EU waters, this could have serious effects for the Member State concerned but also for neighbouring States," the Commission said in a statement.

The new rules would only apply to oil and gas companies operating within Europe and does not cover their activities worldwide.

If approved by the European Parliament, the new law could take effect from 2012. A transitional period of a maximum of two years would apply to existing and planned installations, the Commission said.