Regulatory compliance pitfalls when managing offshore projects part 1

Maritime and aviation rules

Maritime and aviation regulations are critical in shaping the logistics and operations of offshore oil and gas and wind energy projects. These regulations govern daily personnel transfers to long-term project planning and risk management strategies.

Compliance with maritime and aviation rules is essential for ensuring safety, operational efficiency, and environmental protection in the challenging offshore environment.

Safety requirements

A primary area in which these regulations impact is safety requirements. Maritime and aviation safety regulations impose strict requirements on offshore operations, particularly helicopter transport and vessel operations.

For instance, regulations dictate passenger capacity limits for helicopters and establish protocols for flight schedules to ensure the safe transportation of personnel to and from offshore facilities.

Similarly, vessel transfer procedures and equipment for moving personnel between ships and platforms are governed by regulations prioritising safety and efficiency.

Cargo handling

Cargo handling is another critical aspect influenced by maritime regulations. These rules dictate how materials and equipment are transported offshore, ensuring cargo is moved safely and efficiently. Compliance with these regulations is vital for preventing accidents and ensuring the smooth operation of offshore projects.

Furthermore, maritime regulations significantly affect offshore supply vessel activities. These regulations govern vessel operations, including navigation, vessel traffic management, and safety zones around offshore installations.

Adhering to these regulations is crucial for minimising risks associated with vessel operations and ensuring the safety of personnel and equipment.

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Risk management

Risk management is a fundamental component of maritime and aviation regulations. Operators must conduct risk assessments and implement mitigation measures to address potential hazards associated with offshore operations. This proactive approach to risk management is essential for safeguarding personnel, equipment, and the marine environment.

Example

As seen in offshore drilling projects, compliance with maritime and aviation regulations in Indonesia can be challenging. Strict rules for foreign vessels and aircraft operating in the region have caused delays and added costs for operators.

One case involved a foreign-flagged vessel needed for drilling, but Indonesian regulations required an Indonesian-flagged vessel. Securing permissions caused project delays. Similarly, an aircraft intended for transporting crew didn’t meet airworthiness standards, leading to further inspections and delays.

These examples highlight the importance of understanding local laws. Operators should stay updated on Indonesian maritime laws, like Act No. 6/1996 on Indonesian Waters and Act No. 21/1992 on Shipping.

Ensuring that vessels have the necessary safety certifications and comply with the cabotage rule (using Indonesian-flagged vessels) is essential. Partnering with local experts can help streamline compliance.

Supply chain and domestic sourcing

The offshore oil and gas and wind energy sectors face numerous supply chain challenges, particularly concerning regulatory compliance. As the industry navigates a complex web of environmental, safety, and operational regulations, staying compliant across the entire supply chain requires constant vigilance and adaptation. The challenges are compounded by the evolving nature of regulations, which can vary by region and change frequently.

Logistics and transportation compliance

One of the primary supply chain challenges is the logistics and transportation compliance associated with moving equipment and materials to offshore locations. This process involves navigating customs regulations, import/export controls, and transportation safety requirements.

Compliance issues can lead to costly delays, impacting project timelines and budgets. For instance, changes in import/export rules can significantly affect the ability to bring specialised equipment and machinery to offshore sites, necessitating careful planning and coordination with regulatory authorities.

Additionally, strict environmental regulations require companies to manage their supply chains to minimise ecological impacts carefully. This includes sourcing sustainable materials, managing waste and emissions, and ensuring suppliers adhere to environmental standards.

The need for environmental impact mitigation adds another layer of complexity to supply chain management, as companies must proactively address potential ecological concerns.

Health and safety standards

Another critical challenge is maintaining consistent health and safety standards across a global supply chain. Offshore environments are inherently high-risk, and ensuring that all suppliers and contractors adhere to rigorous health and safety standards is essential for regulatory compliance and worker protection.

This can be particularly challenging in regions with varying safety regulations and practices.

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Evolving technology and skills needs

Companies must rapidly adopt new technologies or processes as regulations evolve to remain compliant. This need for technology adaptation can strain the supply chain as operators work to implement new systems and practices that align with regulatory requirements.

Additionally, the offshore industry faces skilled workforce shortages, making it challenging to find qualified personnel with the specialised knowledge and skills necessary for compliance.

To ensure compliance with domestic sourcing regulations in offshore projects, operators must first understand the requirements outlined in regulations, such as the Domestic Content Requirement. This includes the Steel or Iron Requirement and the Manufactured Products Requirement, which dictate that a certain percentage of project components must be sourced domestically.

Operators must classify project components to determine if they qualify as steel, iron, or manufactured products, ensuring that 100% of steel and iron components are produced in the United States.

Domestic cost percentage

Calculating the domestic cost percentage is another essential step in ensuring compliance. This involves determining the Domestic Manufactured Products and Components Cost ratio to Total Manufactured Products Cost.

Operators must include U.S.-produced components of non-U.S. manufactured products in their calculations to accurately assess compliance with domestic sourcing regulations.

Documenting and certifying compliance is crucial for demonstrating adherence to regulations. Operators must maintain thorough sourcing practices and cost records to substantiate their compliance efforts.

Staying updated on regulations is also essential, as changes in domestic sourcing requirements can significantly impact project planning and execution.

Example

A supply chain disruption in Vietnam occurred when changes to import/export rules delayed an offshore drilling project. New permits for importing drilling equipment slowed approvals, impacting timelines.

In Thailand, environmental regulations restricted the import of certain chemicals, forcing the project team to find alternatives or local suppliers, adding complexity.

Managing the regulatory landscape for offshore oil, gas, and wind projects requires a solid grasp of environmental, maritime, and aviation rules.

Operators must plan carefully, engage stakeholders, and use innovative solutions to address regulatory challenges. Staying informed and applying best practices helps ensure compliance and reduces risks.

Environmental regulations

The offshore wind energy and oil and gas sectors are subject to many environmental regulations to protect marine ecosystems, wildlife, and public health. Navigating these regulations is often complex and challenging, requiring operators to plan meticulously and comply.

Decommissioning requirements

One of the most significant hurdles is the decommissioning requirements mandated by law. Operators must permanently plug wells, remove platforms, and restore the seafloor environment once leases expire or infrastructure is inactive for a specified period.

Compliance with these regulations has proven to be daunting; as of June 2023, over 2,700 wells and nearly 500 platforms in the Gulf of Mexico were overdue for decommissioning. This backlog highlights the difficulties operators face in fulfilling their obligations while maintaining operational efficiency.

Environmental assessments

Another critical aspect of environmental compliance is conducting environmental impact assessments (EIAs). Regulations such as the Offshore Oil and Gas Exploration, Production, Unloading, and Storage (EIA) Regulations require comprehensive assessments before licenses or approvals are granted for offshore activities.

These assessments can significantly delay project timelines, as they demand an in-depth analysis of potential environmental impacts, including effects on marine life, water quality, and coastal habitats.

Furthermore, the Habitats Regulations require appropriate assessments of proposed activities that may significantly affect protected sites, necessitating screening exercises and potentially more detailed evaluations.

These additional layers of scrutiny can further prolong project approvals, complicating the regulatory landscape for developers.

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Wildlife protection guidelines

Compliance with marine mammal protection guidelines poses another challenge for offshore projects. These guidelines, issued by organisations such as the Joint Nature Conservation Committee (JNCC), require operators to minimise risks to marine mammals during geophysical surveys and piling noise.

This often necessitates implementing specialised operational practices and monitoring programs to ensure compliance, adding complexity to project planning and execution.

Additionally, endangered species protection regulations require operators to assess the potential impacts of their activities on endangered species, such as the critically endangered Rice's whale in the Gulf of Mexico.

These regulations necessitate careful planning and consideration of ecological factors, further complicating the regulatory landscape for offshore projects. While these regulations are designed to protect the environment and public health, they often present significant challenges for the industry, leading to calls from environmental groups for even stricter regulations to address the environmental impacts of offshore activities adequately.

Carbon regulations

In recent years, the offshore oil and gas industry has been under increasing pressure to reduce carbon emissions, leading to the introduction of carbon intensity regulations. For instance, the U.S. Gulf of Mexico is known for producing some of the lowest carbon intensity barrels globally, reflecting the industry's efforts to adapt to stricter environmental standards.

However, the push for lower carbon emissions presents operational challenges, as companies must invest in new technologies and processes to meet these evolving requirements.

Operators have employed various strategies to navigate these complex environmental compliance issues successfully. For instance, to minimise seabed disturbance, developers have utilised specialised foundation designs and installation techniques that reduce the footprint of oil drilling rigs.

Additionally, extensive studies on the migration patterns and flight behaviours of local and migratory bird species have informed the optimisation of offshore wind turbine layouts, thereby reducing potential collision risks.

Engaging with local fishermen has also been a crucial aspect of project planning, ensuring that access to fishing grounds is maintained and that interference with fishing activities is minimised.

Oil pollution prevention and control

Oil pollution prevention and control regulations strictly prohibit oil discharges from offshore installations into the sea and allow such discharges only under specific permit conditions.

Operators must meticulously apply for permits for all planned discharges, encompassing various offshore energy activities, including well operations, production, pipeline operations, and decommissioning. This regulatory framework aims to mitigate the risk of oil spills and their devastating impacts on marine ecosystems.

Example

A 2016 wind farm operation in Rhode Island is a prime example of navigating environmental regulations successfully while delivering clean energy. It set important precedents for U.S. offshore wind projects, showing that compliance with strict environmental rules is achievable.

The project team secured all necessary permits by planning carefully, engaging stakeholders, and using innovative solutions.

Developers can stay updated on environmental regulations by joining industry associations, engaging directly with regulators, consulting with experts, reviewing impact assessments, and networking with other developers. Regular internal compliance reviews are key to staying in line with evolving regulations.

*Part 2 of this article will explore the impact of permitting, approval, licensing delays, health and safety regulations, local content and labour laws, and anti-corruption and transparency on offshore projects. Stay tuned for the next part.

About the author

Horkiz Rouzi is the founder and CEO of an international Project development and management company – RHIS Group. Through RHIS, Rouzi developed TotalEnergies offshore wind projects in the US.  Also developed Hexas Biomass projects globally.

Currently, she is developing GRIDVISE (Microgrid design and solutions) projects and Texas Innovate (Hydrogen innovation incubator) projects. a. She is the strategic advisor to the US Business Council for Sustainable Development (US BCSD) and a mentor at United Ways women’s initiatives.  

Rouzi pursued her education in China (Peking University), Australia (South Australia University) and the USA (Harvard University). She has worked and lived in 10 countries throughout Asia and America.

Rouzi is multilingual and scales high in social and emotional intelligence.