20151208 hydrocarbon training cyprus - stakeholders session

1

Dutch hydrocarbon sector and

role of regulation and standardization

Jarno Dakhorst & Willem van der Wal

Stakeholders session hydrocarbon sector | Cleopatra Hotel, Nicosia | 8 December 2015

Outline

• Dutch hydrocarbon sector

• Regulations related to offshore gas operations

• Introduction into standardization and certification

• Overview of oil and gas standardization and standards

• Golden triangle

• Next steps for Cypriote hydrocarbon sector

2 Stakeholders session hydrocarbon sector | Cleopatra Hotel, Nicosia | 8 December 2015

3

DUTCH GAS & OIL SECTOR


History of natural gas in The Netherlands

4

• 1948: first gas field drilled in Coevorden

• 1959: discovery of Groningen field => about 900 km2

and first estimate of 2 700 billion m3 producible gas

(one of the biggest gas fields of the world)

• 1961: first offshore drilling in North Sea

• 1973: decision of scaling back Groningen production

and focussing on small fields => dozens of new fields

have been developed

• Now: increased reduction of Groningen production

due to earthquakes and continued small fields policy

SOURCE: NOGEPA


Gas and oil production in The Netherlands

5

Key

Green gas field or pipeline

Red oil field or pipeline

Natural gas production:

• 70,0 billion m3

― 42,3 billion m3 Groningen

field (onshore)

― 27,7 billion m3 ‘small

fields’ (mainly offshore)

Oil production:

• 1,81 million m3

SOURCE: Annual review 2014: Natural resources and geothermal energy in the Netherlands


Dutch stakeholders (1)

6

SOURCE:

ALPS Alerian MLP

Organizations making part of energy value chain

Regulators

Policy makers

Suppliers

Inspection bodies

Researchers

BINGOs

PINGOs

Trainers

Consultants

Investors


Main operator: NAM (50 % Shell &

50 % ExxonMobil)

Other operators like: Centrica, Dana,

Engie, Hansa, ONE, Petrogas,

TAQA, Total, Tulip Oil, Tullow, Wintershall

Main

infrastructure:

Gasunie

Transport

Services (100 % state owned)

Dutch stakeholders (2)

7

Regulators

Policy makers

Suppliers

Inspection bodies

Researchers

BINGOs

PINGOs

Trainers

Consultants

Investors


E.g.:

• Dredging like Boskalis, Van Oord

• Ships and FPSOs like Blue

Water, Damen, IHC

• Marine operations like Allseas, Dockwise , Heerema, Jumbo

• Equipment like Ampelmann,

Huisman, Mokveld, NOV

Governmental

bodies (next

slides)

E.g. Bureau Veritas,

DNV GL, LR, Peterson E.g. Deltares, Fugro,

Marin, TNO

NOGEPA – Netherlands Oil and Gas

Exploration and Production Association

IRO – The Association of Dutch Suppliers

in the Oil and Gas Industry

Governmental bodies for Dutch natural gas

exploration & production

8

• Various governmental bodies involved:

― Ministry of Economic Affairs (EZ) [policy-maker]

― Ministry of Infrastructure and the Environment (I&M) [policy

maker]

― Ministry of Finance [revenues]

― State Supervision of Mines (SSM/SodM) [supervisory body]

― Human Environment and Transport Inspectorate (ILT)

[supervisory body]

― Consumers and Market Authority (ACM) [regulator]

― Energie Beheer Nederland (EBN)

• Main offshore governmental bodies are EZ and SSM


About EBN

9

• EBN …

― … is 100 % state participation of Ministry of Economic Affaires

― … is responsible for great deal of income obtained by Dutch

State from gas and oil extraction from Dutch subsurface

― … cooperates closely with operators for natural gas and oil

production

― … has extensive knowledge of deep subsurface and insight

into innovative exploration and extraction techniques

― … plays important role in successful production of natural gas

and oil – both on land and at sea

― .. participates in the E&P activities the oil and gas producers


About SSM/SodM (1)

10

• State Supervision of Mines (SSM/SodM) …

― … is only supervisory authority for offshore oil & gas activities

― … is mandated by three ministers for supervisory activities;

Minister of Economic Affairs (EZ)

Minister of Social Affairs and Employment (SZW)

Minister of Infrastructure and the Environment (I&M)

― … makes Strategy and Programme (S&P) every 5 years,

describing supervision policy, choices in subjects, objects and

distribution of capacity, which should be approved by ministers

― … makes annual working plans (derived from S&P) and

annual reports (latter are also sent to parliament)

― …. always uses intervention policy that belongs to relevant

legal regime


About SSM/SodM (2)


safety and health

legislation

EZ

DG Energy (policy + permits)

DG (policy)

DG (policy)

SZW I&M

SSM

environmental

legislation

E&P legislation

Monitoring arrangement of SSM/SodM (1)


Monitoring arrangement of SSM/SodM (2)


Withdraw permit

Criminal penalties

Administrative penalties

Public disclosure

Warning

Recommendation

Communication

Sparrow intervention tools

Suspend permit

INTERVENTION PYRAMID

Legal framework for natural gas

exploration & production (1)

14

• Main legislation (also available in English):

― Mining Act

― Mining Decree

― Mining Regulation

• More legislation apply in the field of:

― the environment incl. noise, surface water

― occupational health and safety

― working hours

― transport and supply of gas

― management and use of water systems


Note: hyperlinks to

legislation are subject to

changes

http://www.nlog.nl/resources/Legislation/Mining Act English Translation 2 jan 2012.pdf

http://www.nlog.nl/resources/Legislation/Mining Decree English Translation 23 okt 2011.pdf

http://www.nlog.nl/resources/Legislation/2014-04-26 Translation MBR in English final.pdf



15

• Mining Act lays down “rules concerning the

exploration for and production of minerals and

concerning activities connected with mining”:

1. definitions and general provisions

2. licences for exploration and production of minerals and

terrestrial heat

3. licences for the storage of substances and for the exploration

for CO2 storage complexes

3a. reduction of an area

4. ensuring that the activities are executed properly

5. financial conditions

6. advisors




16

• Mining Act (continued):

7. reporting

8. supervision and enforcement

9. guarantee fund mining damage

9a. coordination of the construction or extension of mining works

and pipelines for the production of hydrocarbons and the

storage of hydrocarbons

10. legal protection

11. transitional provisions

12. withdrawal and amendment of certain acts


Procedure according the Mining Act for

exploration and production activities (1)

17

• Exploration license is applied for from EZ

• Operator indicates place and size of area of investigation in this

application

• Application is published by EZ

• During this period other parties are also allowed to submit an

application

• All applications are looked at simultaneously

• EZ consults:

― TNO (subsurface and production plan)

― SSM (safety procedures)

― EBN (economic feasibility)

• Applicant with best production plan got license

• Exploration drilling activities are carried under supervision of SSM


Procedure according the Mining Act for

exploration and production activities (2)

18

• Oil or gas production license can be applied for when an

economically recoverable amount is found

• Producer must enter into agreement with EBN

• Environment impact assessment must be carried out before

drilling can start

• SSM monitors mining, environmental and labour regulations

during production

• Installations and pipelines must be removed after depletion .


NL Oil & Gas portal

19

Portal provides information about oil, gas and geothermal energy

exploration and production in the Netherlands and the Dutch sector

of the North Sea continental shelf. It aims to help users access

information furnished by the Dutch government in an easy,

comprehensible fashion.

Visit www.nlog.nl/en/home/NLOGPortal.html


Outlook

20

• Annual natural gas production of Groningen field

much lower than in the past [in response to earthquakes]

• Changing from a natural gas exporter to an importer [already the case since this year]

• Stimulation of life-time extension and enhanced

recovery of small fields (mainly offshore), also to

maintain existing infrastructure (e.g. pipeline systems)

• Continuation of being a key player in gas sector in

North-western Europe, also through LNG, biogas and

underground gas storage


21

REGULATIONS RELATED TO

OFFSHORE GAS OPERATIONS


Driver for EU regulations


Underlying drivers for EU regulations (1)

23

• EU offshore industry:

― Ageing production infrastructure

― Structural shifts of main players

― Challenges of the new frontiers

― Inconsistency in company

practices with respect to major

hazards

― Continuing failure in

compliance

― Inadequate safety culture



24

• Regulation:

― Uneven technical expertise

amongst regulators

― Inconsistency and lack of

transparency in incident data

and learnings from

investigations

― Fragmented global

requirements and approaches

― Fragmented EU legal

frameworks – goal setting

versus prescription



25

• Emergency preparedness and response

― Unreliable financial capacity of industry

― Inconsistency in emergency planning

― Incompatible response assets

• Liability for recovery and

damages

― Financial mechanisms inadequate

― Lack of clarity for environmental

liability


Conclusions

26

• Industry highly capable, but:

― strong safety culture insufficiently embedded throughout industry

― lack of transparency/sharing of information

• Some EU regulators best-in-class, but:

― fragmentation of regulatory systems

― cooperation is inconsistent

― safety and environment not universally coordinated

• Need for co-ordination and co-operation amongst

regulators, and with non-EU countries


Directive 2013/30/EU

27

• Safety of offshore oil and gas operations


Directive 2013/30/EU – Nature


Problem part General objectives Specific objectives

1. Risks can be lowered (i.e. too high to accept)

1. To prevent a major incident from occurring

1. Attain best industry practices in the EU based on primary duty of control of major accident risks; leverage global standards

2. Implement best regulatory practices for major accident prevention and mitigation by independent expert regulators in each Member State

2. Response measures need improvement

2. To deal with a major emergency should preventive measures fail

3. Implement fully joined-up emergency preparedness and response in all EU offshore regions

3. Liability provisions incomplete

4. Improve and clarify existing EU liability and compensation provisions

Directive 2013/30/EU – What is needed for

proper implementation? (1)

29

• Member States:

― Scrutiny of technical and financial liability at licensing

― Ensure public participation before any new areas are drilled

― Appoint independent and robust competent authority (CA) for

major hazard regulation – safety & environment

― CA must publish plans and procedures for handling risk

assessment documents, inspections, investigations and

enforcement

― CA must report offshore performance annually to EC

― 'Inactive' coastal MS to cooperate with neighbouring MS

― Companies registered in EU to furnish reports on overseas

major accidents to the MS

― CA to cooperate with EU Offshore Authorities Group


Directive 2013/30/EU – What is needed for

proper implementation? (2)

30

• Industry:

― Technical and financial capacity assessed at licensing stage

― ‘Safety case' to include major environmental consequences

and be 'accepted' by regulator

― Installation emergency response plans prepared for

preventing escalation

― Every well to be notified => regulator / weekly well reports

― Must have scheme for independent verification of safety

critical elements, and well plans

― Corporate major accident prevention policy => regulator

― EU-based operators to report on overseas major accidents

― Workforce to be consulted / whistle blowers protected

― incidents and near-misses reported in EU standard format


Directive 2013/30/EU – Where is the

resources capacity?

31

• Industry needs capacity

for:

― formal safety assessments

― localised emergency

response planning

― scheme of independent

verification

― standardised reporting

― integrating response assets

and capability with national

arrangements


• Regulators needs capacity

for:

― technical expertise

― stakeholder management

― quality systems

― recovering costs from

operator/owner

• Both needs capacity for:

― Cooperating with EU

offshore authorities group

(EUOAG) on priorities for

guidance and standards

Directive 2013/30/EU – Time table

32

• Directive into force 18 July 2013

• Member States to transpose in 2 years

• Fully operational in 3 years

• All existing installations to comply into 5 years

Link to European Commission’s “offshore” website:

http://ec.europa.eu/energy/oil/offshore/standards_en.htm


33

INTRODUCTION INTO

STANDARDIZATION AND

CERTIFICATION


Introduction into standardization –

What are standards?

Standards…

• … are documents with agreements on products,

services and systems

• ... are designed for voluntary use

• ... contribute to:

― (inter)national strength of competition

― innovation

― health, safety and environment

― image

• ... are in accordance with WTO



Why standardization?

35

Overcoming trade barriers


Vision ISO/TC 67

(oil & gas):


What is standardization?

Standardization …

• … is an open process => all parties concerned invited

to participate for broad support

• … is developing agreements based on consensus =>

no sustained opposition

• … is transparent => agreements are publicly

available for comments and use

• … takes place on three levels:

― national (e.g. NEN, CYS)

― regional (e.g. CEN, GSO)

― international (e.g. ISO, IEC)



How is participation organized? (1)

37

All stakeholders + consensus creates broad support for

established agreements

Everyone

who has an

interest

can

participate



How is participation organized? (2)

38

Stakeholder

Standardization process

Mirror committee NC 310008

ISO/TC 67 CEN/TC 12

Documents (e.g. draft

standards)

Input/influence (e.g. expert in

working group)

Stakeholder

Stakeholder

Stakeholder

Stakeholder



How will an ISO standard be developed?

39

3 months by

default 2 months possible

2 months by

default optional; 3 or 4

months possible

2 month

translation (all ISO)

3 month ballot

2 month ballot

NP

CD

DIS Publication

Opt out

Opt in

WD

optional FDIS

• 3 tracks:

― Accelerated: 12 months to DIS and 24 months to publication

― Default: 24 months to DIS and 36 months to publication

― Enlarged: 36 months to DIS and 48 months to publication


Introduction into certification –

Conformity assessment

40

Conformity assessment …

• … is demonstration that specified requirements

relating to a product, process, system, person or body

are fulfilled

• … can be performed by a:

― first party being the person or organization that provides the

object

― second party being a person or organization that has a user

interest in the object (e.g. customer)

― third party being a person or body that is independent of the

person or organization that provides the object, and of user

interests in that object (e.g. certification body)


Introduction into certification – General

requirements conformity assessment process


CAB = conformity

assessment body ISO/IEC 17011

CAB

Product

certification

CAB

management

systems

CAB

Certification of

persons

CAB

inspectionslaboratory

producer / service provider

customer

ISO/IEC 17021 Guide 65 ISO/IEC 17020 ISO/IEC 17024 ISO/IEC 17025

Accreditation body

ISO/IEC 17065

Introduction into certification – Specific

requirements conformity assessment process


Requirements concerning

content:

• product / services

• system

• person

Requirements concerning:

• method to conduct

determination activities

• review and attestation

• need for surveillance

Separated according to ISO 17007

Standard

xxx

Certification

scheme yyy


Practice of certification (1)

43

Accreditation body - RvA

Conformity

assessment

body (CAB

Market

Standard

Scheme Scheme Scheme Scheme

Conformity

assessment

body (CAB

Conformity

assessment

body (CAB

Conformity

assessment

body (CAB

Option 1: each CAB individually



Practice of certification (2)

44

Option 2: central certification scheme to be used by CABs

Scheme

owner

Market

Standard

Scheme

Accreditation body - RvA

Conformity

assessment

body (CAB

Conformity

assessment

body (CAB

Conformity

assessment

body (CAB


45

OVERVIEW OF OIL AND GAS

STANDARDIZATION AND STANDARDS

© Lot Bakker | LOT of Illustrations

http://lotofillustrations.com/


Overview of oil and gas standardization

46

Materials, equipment and

offshore structures

CEN/TC 12

CEN/TC 234

National mirror committees

ECISS

CEN/TC 282

Simplified representation

ISO/TC 67

ISO/TC 118/

SC1

IEC/TC 18

CLC/TC 18X

Electrical installations of

ships and of mobile and

fixed offshore units


ISO/TC 67 – Title and scope

47

• Title:

― Materials, equipment and offshore structures for the

petroleum, petrochemical and natural gas industries

• Scope:

― Standardization of the materials, equipment and offshore

structures used in the drilling, production, transport by

pipelines and processing of liquid and gaseous hydrocarbons

within the petroleum, petrochemical and natural gas

industries.

Excluded: aspects of offshore structures subject to IMO

requirements (ISO/TC 8).


ISO/TC 67 – Goals

48

• Prepare standards required by the industry

• Prepare standards that are adopted worldwide by

bodies such as ABNT (Brazil), API (USA), CEN

(Europe), GOST R (Russian Federation), GSO (Gulf

Region) and SAC (China)

• Prepare standards that are recognized by regulators

• Publish standards that enable companies to minimize

their specifications

• Deliver standards to the target dates on the agreed

work programme


ISO/TC 67 – Structure


ISO/TC 67 – Deliverables

50

SOURCE: IOGP | Poster can be downloaded from www.iogp.org/international-standards


CEN/TC 12 – Title and scope

51

• Title:

― Materials, equipment and offshore structures for the petroleum,

petrochemical and natural gas industries

• Scope:

― Similar to ISO/TC 67, excluding gas infrastructure from the input

of gas into the on‐shore transmission network up to the inlet

connection of gas appliances (covered by CEN/TC 234) and

installations and equipment for LNG (covered by CEN/TC 282).

• Secretariat provided by NEN and CYS


CEN/TC 12 – Mode of operation

52

• Standards are usually developed under Vienna

Agreement in ISO/TC 67 working groups, with active

participation of experts from at least 3 European

countries.

• One of European experts is 'European Project Leader'

(EPL) and checks that both environmental and

regulatory issues are taken into account.

• After publication by ISO, standards are adopted in

Europe as EN ISO (and with that as national standard).

• This development process is coherent with CEN/TC

12’s motto “Global standards used locally worldwide”


IEC/TC 18 – Title and scope

53

• Title:

― Electrical installations of ships and of mobile and fixed

offshore units

• Scope:

― Standardization for electrical installations and equipment of

ships and of mobile and fixed offshore units, incorporating

good practice and aligning as far as possible existing

regulations and IEC publications


IEC/TC 18 – Goals

54

• Standards will:

― chiefly concern factors promoting safety of ships and of mobile

and fixed offshore units; factors promoting safety of life.

― form a code of practical interpretation and amplification of

requirements of International Convention on Safety of Life at Sea,

a guide for future regulations may be prepared by

Administrations, and a statement of practice for use by builders

and appropriate organizations.

― foster interchangeability of parts and ease the selection and

procurement of equipment, including cables for transport of energy,

signals and data, by indicating, as appropriate, IEC standards of

ratings, types, dimensions, materials, quality, test methods, etc.,

whether or not these are influenced by regulations, and will thus

facilitate interchanges between purchaser and supplier.


CLC/TC 18X – Title and scope

55

• Title:

― Electrical installations of ships and of mobile and fixed

offshore units

• Scope:

― Standardization for electrical installations and equipment of

ships and of mobile and fixed offshore units used in the

offshore petroleum industry, including interconnected subsea

equipment, incorporating good practice and aligning as far as

possible existing regulations and IEC/CENELEC publications


CLC/TC 18X – Background

56

• CLC/TC 18X established in October 2011 after

initiative of Norway (also secretary to IEC/TC 18)

• Reason relates to documents where it seems clear

that EU intended to introduce EU standards for the

offshore industry, including mobile units, like

― EU COM(2010) 560 "Facing the challenge of the safety of

offshore oil and gas activities"

― SEC(2010) 1193 "Facing the challenge of the safety of

offshore oil and gas"

― "2010 – 2013 Action Plan for European Standardization"

• Intention is to take the work of IEC/TC 18 as basis for

the work in CLC/TC 18X as far as possible


57

GOLDEN TRIANGLE


Relationship between regulation,

standardization and certification


One way to

demonstrate

is applying

standards

Regulator has

confidence in

value of certificate

to demonstrate

compliance with

law

Third party

conformity

assessment

increases

credibility

Operator has to

comply with legal

requirements

Case 1 – Directive 2013/30/EU (1)

59

Directive 2013/30/EU on safety of offshore oil and gas

operations and amending Directive 2004/35/EC:

“To ensure safety in design and continuous safe operations, the industry is required to follow the best practices defined in authoritative standards and guidance. […] Having due regard to the established priorities the preparation of new or improved standards and guidance should be commissioned without delay.”

“At Union level, it is important that technical standards are complemented by a corresponding legal framework of product safety legislation and that such standards apply to all offshore installations in offshore waters of Member States, and not just non-mobile production installations. The Commission should therefore undertake further analysis of the product safety standards applicable to offshore oil and gas operations.”


Case 1 – Directive 2013/30/EU (2)

60

• European Commission is aiming at harmonised

standards for machinery used in drilling and well

intervention operations in offshore oil and gas industry.

• For this purpose, the European Commission intends to

submit a revised standardization request (formerly

known as mandate), after rejecting of a previous

standardization request by CEN/BT, also based on

recommendations by CEN/TC 12.


Oil and gas standardization and regulation

61

European

Commission

Dutch

government NEN

Mandates

Standards

Standards

Laws

Regulation

Laws

Directives

Legislation Standardization

NC 310008

Standards

WTO ISO

CEN

Vienna

agreement

TC 12

TC 67

E.g. 2013/30/EU

No barriers to trade

E.g.

Mining

Act

Draft mandate

offshore oil &

gas industry


Case 2 – NTA 8120 (1)

62

• SSM/SodM:

― inspector safety of gas networks and integrity and safety of

installations under Mining Act

― grid operators must have an operating safety management

system (SMS) from 2011

― voluntary agreement with requirements to SMS

• Grid operators:

― mostly integrated network companies (electricity and gas)

― also need for quality management system


Case 2 – NTA 8120 (2)

63

• Result:

― voluntary agreement on asset management (with focus on

safety, quality and capacity)

― willingness of participation of (currently named) ACM as

supervisor for Electricity and Gas Act

First edition of NTA 8120 was published in 2009; the second edition in 2014 (also

in English) to align with ISO 55001,

integrate security and better distinct

requirements from recommendations


Case 2 – NTA 8120 (3)

64

• All parties involved developed certification scheme

linked to NTA 8120

• Certification scheme operational since 2011

• Nearly all grid operators are certified for NTA 8120

• Next step to bring NTA 8120 certification under

accreditation (together with ISO 55001 certification)

• With this certificate grid operators demonstrate to

comply with NTA 8120 requirements and in this way

with parts of legislation => inspector can change way of

supervising to system surveillance


Diamond


Working with accredited

conformity assessment

bodies further increases

confident in value

certificate

66

NEXT STEPS FOR CYPRIOTE

HYDROCARBON SECTOR


Some observations

67

• Hydrocarbons are new market and potentially huge

business opportunities (both direct and indirect)

• Development of market needs cooperation with all

parties concerned (like standardization )

• Consider establishing a collective program with joint

objectives endorsed by all parties concerned to

accelerate business

• Meeting objectives can be achieved by dividing work

in ‘task forces’ for each identified aspect


What would be the next steps?

68

• Are all (inter)national stakeholders already engaged?

• What are the gaps to be filled? For example:

― Regulatory framework including role standards and certification

― Training / education of several bodies involved in licensing,

permitting, supervising, operating, maintaining, …

― Infrastructure including facilities for workers

― Own use of natural gas (e.g. fuel [CNG/LNG], power

generation, households, industry)

― Cooperation with neighbouring countries and other parties

― Awareness of society

― …

• What resources are needed? Do we have to prioritize?


Interactive session

69

• Please share your views


70

THANK YOU FOR YOUR

ATTENTION

[email protected]

+31 6 33 334 671 or +31 15 2 690 245

@jarnodakhorst

https://nl.linkedin.com/in/jarnodakhorst
