Saturday, April 13, 2024

ON THE RIGHT: Right agreement framework a must


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THE LAST DECADES have been marked by a considerable development of offshore oil and gas activities. Because of an increasing energy demand and technological innovations, drilling activities extended and moved into deep and ultra-deep water areas.

Almost a third of the oil and a quarter of the natural gas consumed in the world comes from underwater areas and this rush to offshore oil and gas exploration is not about to end. Forecasts show a continuing growth of production in traditional offshore regions and significant development in new areas.

Drilling more and deeper unquestionably means increasing the threats to the environment and natural resources. Accidents on offshore platforms have demonstrated that the environmental risks of offshore drilling activities concern all regions in the world and all types of companies, even the big players. It clearly appears that there are important regulatory gaps, both in terms of safety of offshore drilling activities and liability and compensation in case of accidents.

Strengthening the regulation of offshore drilling activities could mainly come from the regional level for two main reasons.

First, the adoption of global conventions dealing with safety on the one hand, and on liability and compensation on the other hand, seems very unlikely in the short term as the strong opposition from certain states, as well as the absence of a ‘champion’ institution, prevent from achieving it, even if this ambition should not be abandoned.

Second, there are regional organisations which states can rely on to better regulate offshore drilling activities, regional seas programmes in particular. However, in most countries, the resolution of environmental problems related to offshore oil and gas exploration and exploitation will not come from the sole adoption of agreements, even legally binding ones.

That is the reason why a strategic framework is needed in order to create the conditions for success of current and future regional binding agreements.

The regulation of offshore drilling activities is a complex issue and developing agreements, even at the regional level, will face challenges and encounter barriers.

In particular, it will certainly be difficult to simultaneously develop legal provisions both on safety and liability and compensation. That is a lesson learnt from the Mediterranean and European Union experiences.

These two issues indeed fall within different fields of expertise and are usually not addressed by the same stakeholders.

Moreover, the difficulty in negotiating provisions on liability and compensastion – which is highly sensitive because it is financially impacting – could paralyse the entire process.

In the regions where the conditions to simultaneously regulate the two issues are not met, a two step approach could be taken. As a first step, it is crucial to fill the gaps and strengthen the safety of offshore drilling activities by developing regional binding agreements.

The offshore sector is certainly the least internationally regulated marine-related industry. By comparison, the shipping sector is subject to dozens of international and regional agreements embracing both the safety and liability and compensation issues. Given the current growth of offshore activities and the accidents which highlighted their risks for the environment, it is time to move out of this aberrant situation.


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