Offshore oil & gas and shipping: a complex legal picture

So, which laws apply in the UK to shipping on the one hand and to offshore oil and gas installations on the other?

The movement and operation of ships, and the operation of offshore oil and gas installations and infrastructure, are clearly interlinked – for example, when ships supply materials to an offshore installation or are used to maintain the structure. An important question is when is a ship classed as an offshore installation under safety and maritime laws?

The main legislation covering the safe operation of shipping in the UK is the Merchant Shipping Act 1995 (MSA). This is a consolidating Act which helpfully pulled together in one place the bulk of the shipping law in the UK.

In addition to the MSA there is the Marine Safety Act 2003, which is especially relevant to port safety.

Under the MSA there are various regulations which are important in relation to requiring ship owners and operators to protect the health and safety of people working on ships. The most important of these are the Merchant Shipping & Fishing Vessels Health & Safety at Work Regulations 1997.

Regulation 7 of the 1997 Regulations requires a “suitable and sufficient” assessment to be made of the risks to the health and safety of workers on ships. This requirement to assess risks to the health and safety of workers (and others who could be put in danger), is common across the UK’s health and safety system – whether in shipping, onshore or in the offshore safety regime.

In addition, the Merchant Shipping (Distress Signals and Prevention of Collisions) Regulations 1996 (generally known simply as ‘the Collision Regulations’), place duties on ship owners and operators to prevent – or reduce – the risk of shipping collisions that could cause damage to property and infrastructure. The duty to prevent collisions (and associated damage) applies both to collisions between ships and situations such as a ship striking an offshore wind farm or a drilling rig.

If a ship is registered in the UK then the MSA will apply to that ship wherever it is operating in the world.

However, if a ship is non-UK registered then the MSA will only apply to it while it is in a UK port and within the UK Territorial Sea. If a non-UK registered vessel is operating outside the UK Territorial Sea then the UK’s merchant shipping legislation will not apply to it. In this situation, the international law of the sea will apply even if the ship is in seas above the UK Continental Shelf (UKCS), the region of waters surrounding the UK in which the country has mineral rights (including the UK’s section of North Sea oil and gas fields).

It is important to appreciate the distinction between the Territorial Sea and the UKCS. The Territorial Sea runs 12 nautical miles from the UK coast but the UKCS runs all the way to the boundaries of the equivalent continental shelves with other nations. So, for example, in the North Sea the UKCS runs up to the relevant boundaries with, respectively, Norway, Denmark and the Netherlands. So, the UKCS extends far further from the UK coast than the Territorial Sea does.

Offshore oil and gas legislation

In relation to the UK’s offshore oil and gas legislation – covering both the general operation of offshore oil and gas fields and platforms, and the safety of offshore oil and gas installations and operations – there is unfortunately no consolidating Act, unlike how the MSA is a consolidating law covering shipping operations.

In fact, the oil and gas legislative framework is a bit of a patchwork which has been built up since the early 1970s. As a result, some of the terminology in the various laws doesn’t sit well.

For example, there are at least five different terms which describe or reference offshore installations and this undoubtedly causes confusion. The terms used for offshore installations include production installation, non-production installation, fixed installation, mobile installation and drilling rig.

Other important terms within the legislation include ‘duty holder’ and ‘operator’. The duty holder is ordinarily the legal person in whose name the ‘safety case’ for the installation runs. In essence, a safety case is a set of policies, rules and procedures setting out how the offshore installation will be safely operated, and its workers kept safe, which must be approved by the offshore safety regulator, the Health and Safety Executive. The requirement for a safety case is contained in the Safety Case Regulations 2005.

In contrast, the operator is ordinarily the party which has the right to operate within the offshore field in which the work is ongoing. It can be easy to confuse the duty holder with the operator.

One of the main provisions in UK oil and gas law goes all the way back to 1982. This is section 23 of the Oil & Gas Enterprise Act. This contains the term “exploration and exploitation of offshore natural resources” and in general terms this is how offshore oil and gas operations and activities are defined in the law.

In terms of ensuring the safety of offshore oil and gas installations, activities and workers, another important law is the Health and Safety at Work etc Act 1974 (Application Outside Great Britain) Order 2013. This extends the application of all relevant duties under UK health and safety at work legislation to offshore installations.

Other important laws and legal duties relevant to offshore oil and gas are contained in the Petroleum Act 1998. In particular, Section 10 of the Act provides that UK criminal law applies to an installation and everything within 500 metres of it even if it is in transit.

Some offshore installations are in essence ships – for example, because they are floating platforms, or vessels. which can move from one sea location to another to drill for oil and gas, or for maintenance purposes.  

As a result, an offshore installation may be registered as a ship in the UK or elsewhere, and/or may be legally classed as a ship in the UK even if it is not registered here. As such, there is potentially a crossover between whether the UK oil and gas legislation, the UK shipping legislation, or both, apply to the safe operation of the installation.

So, potentially, three different legal regimes may apply at the same time. These are merchant shipping legislation, health and safety at work legislation, and oil and gas legislation.

Failure to comply with any of the three legislative regimes and requirements can lead to criminal sanctions (including prosecutions and fines), and there may also be civil legal duties, such as a requirement to pay compensation for incidents resulting from a failure to meet the requirements of any of the three regimes. In some circumstances, it can be very difficult for the duty holder in charge of the relevant offshore installation to work out which laws apply.

When an offshore installation is also a ship

So, given the overlap of the legislation, a question which commonly arises is when is an offshore installation a ship?

The basic point is that an offshore installation can be both an offshore installation and a ship at the same time. If it does fall into both categories then this means that the MSA and also the oil and gas legislation will apply to it concurrently. 

If the oil and gas legislation applies, then the Health and Safety at Work Etc 1974 (HSWA) and related regulations will also apply. The MSA defines “ship” as “including every description of vessel used in navigation”. A vessel is simply something which floats and there is case law stating that “used in navigation” doesn’t mean the need for the vessel to be able to navigate itself from port to port. If it is capable of navigation by propelling itself across the sea then this makes it a ship under UK law.

An offshore installation within the UKCS is any installation to which a safety case applies under the Safety Case Regulations. So, if a vessel has a safety case and is capable of navigation, then it will be both an offshore installation and a ship at the same time.

For the purposes of deciding whether the offshore installation is also a ship there are at least four different categories to consider. These are: a fixed installation; a mobile installation which is UK registered as a ship; a mobile installation which is not capable of navigation and therefore isn’t a ship as defined by the MSA; and then lastly a mobile installation which is capable of navigation but happens not to be registered in the UK.

The last of the four categories applies to all mobile installations capable of navigation so long as they are not registered in the UK – whether they are registered abroad or are not registered at all.

Therefore, the MSA won’t apply to a fixed installation, such as a fixed offshore platform that is not capable of navigation. Merchant shipping legislation won’t apply to a mobile installation if it isn’t capable of navigation. If it’s a UK-registered ship the MSA applies to it when operating worldwide.

For the fourth category – a mobile installation which is capable of navigation but happens not to be registered in the UK – then the MSA will apply to it but only while it is in the UK Territorial Sea.

Bruce Craig leads the Pinsent Masons litigation team in Aberdeen as a litigation and regulatory partner specialising in health and safety, shipping and commercial disputes.

Contact him at: pinsentmasons.com
[email protected]