Maritime Law and the Offshore Industry

• Author: Edgar Gold; Aldo Chircop; Hugh M. Kindred; William Moreira
• Pages: 1088-1136

1088

CHA PTER 26

MARITIME LAW AND THE

OFFSHOR E INDUSTRY

A. INTRODUCTION

While traditionally maritime law had as its area of concern commercial

shipping matters and to a lesser extent f‌ishing vessel activities, the tra-

ditional areas of application have since been expanded so as to include

other activities, including certain activities in the offshore industry. In

a maritime context, when mention is made of offshore activities, gener-

ally it is offshore oil and gas exploration and production activities that

come to mind. While it is certainly the case that such activities form the

largest segment of the offshore sector, they are by no means the only ac-

tivities conducted. Interest in alternative forms of energy generation is

increasing. Offshore wind farms, particularly in places such as England

and Europe, are currently producing renewable energy, with many more

projects under development and construction globally.1 Hydrokinetic

energy projects, namely those that derive energy from waves, tides or

ocean currents, are operating at a lesser scale, however research and

1 At the time of drafting, there are several Canadian onshore wind farms in opera-

tion, however there are no offshore wind farms. One explanation for this is that,

although there are a number of high quality offshore sites with signif‌icant potential,

the areas are remote and therefore far away from the existing electrical grid. See the

website of Natural Resources Canada (NRCan) regarding renewable energy, “About

Renewable Energy,” online: NRCan www.nrcan.gc.ca/energy/renewable-electricity/

7295.

Maritime L aw and the Offshore Industr y 10 89

development initiatives are increasing.2 Other than alternative energy

generation, seabed mining is another activity in the offshore sector that

is forecasted to increase signif‌icantly, both in national and international

waters.3 Effectively, the offshore industry is formed of a multitude of

diverse activities in various sectors. Indeed, each sector of the offshore

industry is the subject of extensive literature in their own right.

For the purposes of this chapter, the focus shall be on the sector of

the offshore industry encompassing oil and gas exploration and pro-

duction. Canada is an important offshore energy producer with proven

resources off the East, West, and Arctic coasts. Although exploration

for oil and natural gas began off Canadian coasts over half a century

ago,4 technological advances, market conditions, and the general econ-

omy have f‌inally reached a point that encourages the industry to further

develop these resources.5 Newfoundland and Labrador currently have

three offshore oil producing projects, with a fourth project, Hebron,

currently in development.6 Nova Scotia currently has two gas producing

2 By way of example, in the summer of 2014 the United States Bureau of Ocean

Energy Management approved and issued leases for hydrokinetic technology test

facilities offshore Florida and Oregon. See the website of the Bureau of Ocean

Energy Management (BOEM), and in particular the renewable energy section,

“Renewable Energy,” online: BOEM www.boem.gov/Renewable-Energy. In Canada,

there is currently a tidal power plant in operation in Nova Scotia, with further

wave and current research projects under way in both British Columbia and Nova

Scotia. See the website of Natural Resources Canada regarding renewable energy,

above note 1.

3 Currently, the International Seabed Authority (ISA), an intergovernmental body

with control over mineral-related activities in the international seabed area, has

issued several exploration licences. For further information, see the website of

the International Seabed Authority, online: ISA www.isa.org.jm.

4 Although Canada’s f‌irst offshore well was drilled off of Prince Edward Island in

the 1940s, exploration began in earnest in the 1960s offshore of Nova Scotia

(see Canada-Nova Scotia Offshore Petroleum Board (CNSOPB), “Exploration

History,” online: CNSOPB www.cnsopb.ns.ca/geoscience/geoscience-overview/

exploration-history), Newfoundland, and British Columbia (although for British

Columbia a federal moratorium on offshore oil and gas exploration was imposed

in 1972). Exploration drilling in Canada’s Arctic offshore began in 1972, with

the height of activity taking place in the 1970s and 1980s. See Jennifer Dagg

et al, Comparing the Offshore Drilling Regulatory Regimes of the Canadian Arc-

tic, the U.S., the U.K., Greenland and Norway (Drayton Valley, AB: The Pembina

Institute, 2011), online: Pembina Institute www.pembina.org/reports/comparing-

offshore-oil-and-gas-regulations-f‌inal.pdf.

5 See the websites of two of the East Coast offshore regulators, Canada-Newfound-

land and Labrador Offshore Petroleum Board (CNLOPB) and the CNSOPB, online:

CNLOPB www.cnlopb.ca and CNSOPB www.cnsopb.ns.ca, respectively. See also the

website of the National Energy Board (NEB), online: NEB www.neb-one.gc.ca.

6 Namely, the Hibernia Project, the Terra Nova Project, and the White Rose Project.

PART VII: SPECIAL ISSUES IN M ARITIME LAW1090

projects.7 Furthermore, it is also likely that West Coast and Arctic re-

gion resources will be developed in the foreseeable future.8 At this junc-

ture, however, the concentration of offshore activity in Canada remains

off the East Coast, with East Coast ports, and in particular St. John’s,

Newfoundland, being the key supply bases.

One third of the estimated global reserves of oil and gas, being ap-

proximately 1.3 trillion barrels of oil and 6.2 quadrillion cubic feet of

gas, occur in the offshore and of those offshore reserves, a signif‌icant

amount are located in the continental margin sediments.9 The explo-

ration for and production of oil and natural gas in offshore regions,

especially in the North Atlantic, the North Sea, the Arctic Ocean,10 is

generally far more challenging than onshore production. Offshore in-

stallations, structures and equipment have been designed and developed

to deal with adverse weather conditions and the marine environment.

As technology has advanced, exploration and production operations

have moved into ever deeper waters. This trend is set to continue, as

the greatest growth predictions for the offshore and the largest capital

expenditure increases are in relation to deep water reserves.11 Moreover,

exploration in ultra-deep waters in excess of 2,000 metres is increas-

ing,12 and companies are exploring ways to move many of the structures

and equipment f‌loating on the surface to the sea f‌loor.13

With regard to exploration and production operations, it is worthy

of mention that oil and gas companies normally drill three types of

wells. The f‌irst will be an exploration well. Prior to this, there will have

been seismic surveys conducted in order to identify geological forma-

tions of interest, and the drilling of the exploration well will then seek

to conf‌irm the presence of resources.14 Provided the results of the explo-

7 Namely, the Sable Offshore Energy Project and the Deep Panuke Offshore Gas

Project.

8 See, for example, the National Energy Board’s website, above note 5, for updates.

9 Dronnadula V Reddy & Arisi SJ Swamidas, Essentials of Offshore Structures (Boca

Raton, FL: CRC Press, 2013) at 47.

10 Which includes the Barents Sea and the Beaufort Sea.

11 Balwinder Rangi, “Deepwater Spend Forecast to Surge from 2016,” online: Oil and

Gas Financial Journal www.ogfj.com/articles/print/volume-11/issue-4/features/

deepwater-spend-forecast-to-surge-from-2016.html.

12 Currently, the world’s deepest platform installation is the BW Pioneer FPSO in

the Gulf of Mexico, with a working depth of 2,600 metres. Ibid.

13 Jared Anderson, “Going Ultra-Deep: GE Opens $500M Subsea Oil and Gas R&D

Center in Brazil,” online: Breaking Energy www.breakingenergy.com/2014/11/14/

going-ultra-deep-ge-opens-500m-subsea-oil-and-gas-rd-center-in-brazil.

14 Canadian Association of Petroleum Producers (CAPP), “Offshore Drilling,” on-

line: CAPP www.capp.ca/canadaindustry/oil/offshore/Pages/default.aspx.