Offshore Floating Production
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CHAPTER 1
Introduction to floating production
A Floating production as a legal topic
1.1 A book on the legal issues relating specifically to offshore floating production is long overdue. Some of the legal topics may be covered in texts on subjects such as oil and gas contracts, offshore construction, maritime charterparties, shipping and insurance, but they have not previously been brought into one text, nor examined with only floating production in mind. 1.2 Is this a distinct legal topic? No, but neither is much of what may be described as aspects of commercial law, such as shipbuilding contracts or charterparties. In each of these areas, it is the context in which the contract is performed that requires a distinct legal focus. So it is with floating production. A good illustration may be found in a recent case decided by the English High Court concerning a floating production contractor’s remuneration.1 The court was asked to determine whether that remuneration included a bonus, even though production fell short of the monthly target. The decision turned on the detailed contract terms describing the calculation of monthly targets. A knowledge of similar performance obligations in conventional maritime charters or the requirements of design parameters in a construction contract may provide some guidance to how these detailed terms should be understood; but a thorough appreciation of how targets are set in floating production contracts according to the availability of hydrocarbons is required to understand fully what the parties in that case had agreed. 1.3 There is not a substantial body of dedicated legal cases concerning floating production, as there is for construction or chartering. We have covered the limited number of reported cases involving FPSOs in some detail. One reason for there not being more cases is the relatively small number of floating production projects compared to shipping or construction. But the principal reason is the collaborative nature of these projects. When problems arise, the priority is usually to agree a solution acceptable to the parties involved. However, difficulties, and differences of opinion on how to resolve them, are a common occurrence in each stage of any project. From compliance of the unit with technical requirements, the cost and timing of achieving first production, the difficulties of installing and hooking up the facility to the field, achieving continuous production in accordance with the required specification, meeting regulatory and environmentalPage 2
B What is an FPSO?
1.6 The usual reason for asking “What is an FPSO?” is to enquire whether it is a ship or an offshore production installation. The perception is that if it is a ship, it operates within the usual maritime concepts and conventions, whereas if it is an offshore installation, it operates more to oil and gas industry norms. In the early days of floating production, it was often thought important from a legal perspective to identify the floating production facility either as an FPSO, with the inference this would be more of a ship type facility, or a floating production unit – an FPU – which would be more of an offshore installation. The same quandary arises with the introduction of FLNG facilities. Are these FPSOs that produce LNG, or are they something different? 1.7 The difficulty often stems from the convention in the oil and gas industry to apply initialised names to any facility being used, whether it is a TLP,3 MOPU,4 FSRU5 or whatever. The assumption is that the initials will dictate the identity and function of the facility to be procured and operated. In many cases, the assumption is correct. An FPSO will be expected to produce, store and offload oil, whereas an FSO6 will be expected only to store and offload oil. That said, if a facility is described only as an FPU (asPage 3
(i) Is it a ship?
1.12 This is a frequently asked question in the context of the legal categorisation of an FPSO. The answer is usually “it depends” and may be followed by “does it matter?” The vessel may be a ship if it is capable of navigation.8 Some FPSOs are so capable, many are not. Notwithstanding, for various reasons, the vessels are routinely entered in ship registries, and therefore in practice are treated as conventional ships for maritime legislation purposes. The main reason may be to allow a mortgage over the vessel to be registered.9 Registration also creates the requirement for the vessel to comply with international maritime regulations and to achieve classification certification.10 Although the shelf state may choose to incorporate compliance with international maritime regulationsPage 4
(ii) What is the F for?
1.16 It is obvious for all to see that an FPSO or FPU or FLNG should float. That may be useful in areas where production using a bottom fixed installation could be problematic. For example, where there are frequent typhoons, it may be necessary for the facility to float so that it is free to move away to safety when disconnected from the wells. Where there is an iceberg flow, in the worst case an FPSO may be disconnected. In places of extreme weather, an FPSO may weathervane to avoid damage. In deep water locations, there may be no option but for a floating facility. Another advantage of a floating solution is that it allows construction to occur in a preferred yard, possibly very remote from the final site of operations. Whatever the reason for a floating production facility being chosen, the consequence is a restriction on the options available to achieve optimum levels of production. Floating facilities are limited according to weight, space and stability. If the volume of production or characteristics of the hydrocarbons require heavier or more expansive processing facilities, it may be the case these cannot easily be accommodated on the available space, or in accordance with the stability limitations. These consequences are considered in on FPSO design.
(iii)
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What is the P for?
1.17 It may surprise many, but neither oil nor gas comes out of the reservoir in a happy state. Processing is required to remove water, sand, sulphur or other impurities and to separate the oil from the gas, which may require a degree of coercion depending on the characteristics of the reservoir fluids and the conditions in which the production is being performed. The important point to note from a legal perspective is that new production from any reservoir is unpredictable and the requirements for production from each field may differ, often in fundamental aspects. Therefore, an FPSO that is able to produce successfully on one field may not be able to produce on a different field, even within the same location, without substantial modifications. The other obvious and significant feature of oil and gas production from a reservoir is that the total volume to be produced, and therefore the length of the production period, will be a matter of conjecture. This is a significant topic when negotiating the length of an FPSO operating agreement.
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(iv) What is the S for?
1.18 Storage capacity may seem a dull statistic, but it is at the heart of a successful operating project. If the FPSO has a large storage capacity, the prospect of cessation of production due to interruptions to offloading will be significantly reduced. Conversely, when storage capacity is small, there may be little tolerance to any interruption to the offloading schedule, including delays to the offtake vessel or loading suspension due to adverse weather. The capacity is set in stone, or at least steel, at the construction phase; increasing capacity during production is infeasible. However, anticipating required capacity before production begins may not always be easy.(v) What is the O for? 13
1.19 The offloading facility should be adequate to ensure that produced oil or gas is transferred to the offtake vessel with reliability in sufficient volumes to ensure continuous production, taking account of available storage capacities, prevailing weather conditions and the specifications of the offtake tankers available in the area. Dynamically positioning bow loading shuttle tankers as used in the North Sea require very different offtake arrangements to the conventional trading tankers which are loaded by means of floating hoses in West Africa and other locations. Offloading equipment includes the offtake hose and the discharge pumps and metering system. The produced oil must also meet quality requirements; the receiving vessel will not usually accept oil with water content exceeding a permitted maximum. For offloading from an FLNG facility, there may be the additional logistical obstacle of discharging LNG into one dedicated offtake vessel and LPG or condensates into another. The storage restrictions mentioned earlier are then exacerbated; if an LPG vessel is unavailable to receive offtake, the consequence may be that the LPG storage tanks become full, preventing continuous production, even though the LNG tanks have sufficient capacity.
(vi)
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Is an FLNG a type of FPSO?
1.20 It may be. FLNG is often used to describe any form of floating unit which produces LNG. If it sits over the reservoir, it will process the hydrocarbons in the same way as a conventional FPSO, and then liquefy the gases and process the condensate. An alternative option is for the initial oil and gas processing to be performed on a separate vessel, with the methane being transferred to a floating liquefaction vessel, which will also operate as an LNG storage and offloading facility, which could be described as an FLSO14 The key point here is that although the expression FPSO is used as a generic term describing offshore floating production, it does in fact take many forms. We use the expression FPSO to cover all types of floating production units, including FLNG.
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(vii) Is an FLSO an FLNG or an FPSO?
1.21 Both. Although the FLSO will receive processed gas, which it would then liquefy, rather than the hydrocarbons direct from the well which first must be processed before liquefaction can occur, it should not be overlooked that the P in FPSO does not refer to processing, but the obligation to deliver product meeting a minimum specification. Thus, the essential obligation of a conventional FPSO operation is materially identical from a legal viewpoint. Accordingly, the legal structures described in this text concerning operation of FPSOs would apply equally to the operation of an FLSO. 1.22 Possible variations may include the responsibility of the FP Contractor to process hydrocarbons received from the well using a conventional FPSO, moored nearby. In that context, the contractual obligations of the FP Contractor would be more extensive, but the essential legal obligations remain, i.e. to receive the hydrocarbons with characteristics within certain parameters and ultimately delivering product to an agreed specification. The terms of any applicable charterparty, or lease and O&M agreement, would be essentially identical to the obligations and liabilities, and the allocation of risk and reward, which would apply to a conventional FPSO.C What is an FPSO charter?
1.23 Taking into account the operational risks inherent in floating production projects, as highlighted earlier, it is common for an oil and gas company (the ‘Company’) to appoint a contractor (to which we shall refer as the ‘FP Contractor’ (i.e. the ‘Floating Production’ Contractor; and see further Section E regarding contract structures) to procure the production facility and then to manage production operations under the Company’s instructions. This may be done under a form of charterparty, similar to an oil company engaging a ship owner to provide oil or gas shipping services. The crucial difference between the two is that, in addition to providing loading, storing and transportation services, the FP Contractor providing and operating the facility also undertakes the production obligations, under the Company’s instruction. Thus, whereas under a typical tanker time charter, the ship owner’s appointed master will be responsible to perform transportation obligations underPage 7
D FPSO contracts – English law
(i) General principles
1.26 This book concerns the application of English law to FPSO contracts. Not all FPSO contracts are governed by English law, but following traditions found in maritime law, many are, and others are written using forms adapted from English law. The important feature of English law, which is one reason for its being adopted for common use in international commercial contracts, is that the parties’ contractual bargain may be determined by reference to the words in the agreements they sign. A written agreement is not essential to create an enforceable contract, but, in the floating production sector, it is usual for the contracts to be many pages, with various schedules and appendices, often exceeding 100 pages. To determine the parties’ intentions from such long, complex and sometimes inconsistent documentation is not easy, but under English law, that is all thatPage 8
(ii) Contract forms
1.28 There is no industry standard nor common form of FPSO charter. In the early days of North Sea operations, many followed familiar tanker time charter formats with additional terms for processing services. These have been adapted for use elsewhere. They use maritime terminology more liberally than forms generated by oil and gas companies, which may follow more closely general oil and gas infrastructure procurement and services forms. Many forms borrow from the two, some being happy hybrids, and some unhappy grafts. The structure of the charters tends to follow a similar pattern, as summarised in Section F, but there is considerable diversity in the terminology used.Page 9
E FPSOs – contract structures
1.30 It is typical for there to be a number of contracting parties in any FPSO project, and with that a series – often even a proliferation – of individual contracts between different parties, creating a web of contractual relationships, which could look something like this:
Figure 1.1 Typical FPSO charter structure
(i) The FP Contractor
1.31 In this book we refer throughout to the ‘FP Contractor’ and the ‘Company’. In the context of an FPSO charter, the FP Contractor will refer to the entity owning thePage 10
(ii) The Company
1.32 By way of background, ownership structures relating to the oilfield where the FPSO operates and to the facility itself may be explained as follows. 1.33 The ownership of an oilfield will vary according to the licencing regime in place at the FPSO location. For example, in the North Sea, the state retains ownership of the oil and gas reserves, but issues a production licence to one or more oil companies, which allows the licensees to take ownership at the wellhead. In countries with less mature legal systems, a similar arrangement may be agreed by way of a concession. Another model is the negotiation of a production sharing contract, whereby a state-owned oil company enters into a consortium with overseas participants. In each of these forms of licencing, it would be usual for the licensees to appoint an operator to manage production activities on their behalf. A similar structure may occur in oil producing nations where there is substantial capital available, but technical assistance is required; an operator may be appointed under a service contract. 1.34 The FPSO itself may be procured, owned and operated by the licence holders of the field, who will enter into a contract for the construction or refurbishment/conversion of the FPSO and perhaps also a contract for operating and maintenance services.20 The more common arrangement, however, will be that the field owner or licensees/concession holders/consortium members, or the operator on their behalf, will charter the FPSO from an independent vessel owner: the FP Contractor. Operational services are then performed either by the field owner, the owner of the vessel or a third-party services company, the field owner/charterer identifying the required characteristics of the unit and the owner subcontracting the newbuild/conversion work to the construction shipyard(s). 1.35 An operator’s authority to act on behalf of the field owners/licensees would normally be derived from a joint operating agreement or service contract. The operator would be given authority to bind the licensees to contractual obligations, subject to certain requirements for approval. It is helpful for the FP Contractor to know the extent of authority delegated to the operator, and those decisions which would need to be referred to the owners. For example, if the FP Contractor raises claims for variation orders, the operator may have authority to approve these up to a certain level, above which the field owners’/licensees’ approval would be required. 1.36 This text consistently refers to the Company as the party to whom the FP Contractor owes obligations under the FPSO charter. However, that is a simplification; it is usually the case that the FP Contractor owes obligations to all parties with an interest in the ownership of the oilfield where the FPSO operates.
(iii)
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Subcontracting
1.37 Unlike a typical construction contract, an FPSO charter would not usually contain prohibitions against work being performed by subcontractors, even though a significant part of the contractual obligations may be the design and construction work, usually performed by way of subcontracting. Therefore, the FP Contractor may subcontract its performance obligations as it sees fit.
1.38 In some jurisdictions, the FP Contractor may be obliged to subcontract aspects of the work to satisfy ‘local content’ rules. These require a proportion of the work involved in an oil and gas production project to be performed by natives of the jurisdiction where the work is to be performed.
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(iv) Compliance with local content requirements
1.39 The obligation to satisfy local requirements for a sufficient value of work being performed by native contractors in the place of operations would rest with the Company under the terms of its licence. However, the Company may wish the FP Contractor to contribute towards achieving whatever objectives may be set for local content by employing local contractors. It is difficult for the FP Contractor to make any firm commitment on this point, particularly as it would not wish to use substandard labour or contractors if alternatives are available. Therefore, the FP Contractor’s obligation is often described only as a commitment to use reasonable endeavours, or to use local contractors if they are reasonably suitable, or at a minimum to provide an opportunity to local contractors to bid for available work.21(v) Alternative structures
1.40 As mentioned earlier, not all FPSO projects use charter contracting structures; an oil and gas company may prefer to control project development itself, and to own the FPSO. This is likely to be the case for an LNG FPSO project, where the unit receives fluids direct from the reservoir, given the project’s complexity, scale and level of uncertainty. Nevertheless, the Company may wish to benefit from the expertise provided by an FP Contractor who may be appointed to undertake the usual design, procurement, construction and installation obligations under a typical FPSO charter, but to be performed on management contract terms, essentially the extension of an O&M agreement to include the pre-acceptance phase of the work. The key distinction here between the management and FPSO charter terms is that the risks associated with capital expenditure, both the initial outlay and realising any residual value in the FPSO once production ends, are left with the Company. The FP Contractor’s risk relates entirely to its own performance, with its remuneration dependant on the level of service provided. 1.41 A more complex contracting structure would require the parties to share, to some extent, in the capital risk.22 The design, construction and installation cost would be esti-Page 12
(vi) Assignees
1.42 An assignment of an English law contract may take two forms. Neither party has the right, without the consent of the other party, to assign its contractual obligations to a third party. The assignment of obligations is usually described as being a novation, as it brings new contractual obligations into existence.24 The contract is treated as having been made from its inception between the new contractual parties, subject only to any qualifying terms in the novation agreement which may limit or allocate responsibility for pre-existing liabilities. 1.43 In general, no consent or contractual right is required under English law for an assignment of the contractual benefits.25 The assignee does not enter into a direct contractual relationship with the counterparty and the assignor remains responsible for contractual performance. Provided that notice of the assignment is served on the counterparty, the assignee can sue for performance of the contractual benefit.26 In practice therefore, one party may not be concerned greatly if the other party assigns its rights. Such assignments are typically used to provide the financiers of an FP Contractor with collateral over the FPSO contracts to which they are party. For example, if an FP Contractor assigns to itsPage 13
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(vii) Mortgagees
1.46 In addition to either party assigning its rights under the contract by way of security for financing, it may be obliged to give security over the vessel itself. As mentioned in paragraph 1.12, it is usually the case that FPSOs are registered in the same way as ships, which facilitates the imposition of a mortgage over the vessel, as security for any loan made for its acquisition. 1.47 The Company will usually permit the FP Contractor to have the right to create a mortgage over the FPSO in favour of its financiers, which may be a central requirement in order for the FP Contractor to be able to finance the procurement of the FPSO. However, the Company would then require from the FP Contractor’s financiers a commitment not to interfere with the operation of the FPSO or any other rights of the Company, provided that the Company is not in default of its obligations. This commitment is usually set out in the form of a letter of ‘quiet enjoyment’ or other agreement made direct between the Company and the FP Contractor’s financiers. In creating this direct agreement, a mortgagee does not become a party to the FPSO charter (other than in the circumstances where a novation is allowed, as mentioned in paragraph 1.42 earlier), but would nevertheless acquire enforceable rights under the terms of the direct agreement. 1.48 Assuming the FPSO at all times remains the property of the FP Contractor, or its affiliate, the FP Contractor would wish to ensure that the Company, as the user of the asset, does not create any maritime liens which may be enforced against the vessel. This is a complex topic of maritime law, but in essence, a maritime lien may be created where services are provided to a vessel, any claims for which may be enforced against the vessel ‘in rem’ i.e. against the vessel itself as opposed to simply against the owners of the vessel ‘in personam’.30 A number of these claims may rank in priority ahead of the mortgage, which is obviously a situation the mortgagee would wish to avoid if at all possible. Therefore, it is usual to provide in the FPSO charter that the Company shallPage 15
F Typical FPSO charter obligations
(i) Charter structure
1.49 Although the obligations in the charter are often split between two documents, one being the lease and the other the services agreement, the essential obligations remain materially the same. Complications may be caused by those obligations being separated, and in some cases overlapping, but the overall chartering structure is the same. That is, the FP Contractor generally takes on a ‘turnkey’ obligation31 to procure and provide a floating production facility suitable for operating at a particular location, receiving hydro-carbons from one or more reservoirs and processing in accordance with the charterer’s instructions, providing all repair and maintenance, with the FP Contractor’s remuneration being dependent, in varying degrees, on the level of service provided. Ancillary obligations include the requirement to hook up and install the facility ready for operations by an agreed cancelling date, the commitment to maintain the facility on location for an agreed minimum period of time and the obligation to achieve a minimum quality and quantity of product, to be stored and offloaded in accordance with the Company’s instructions. 1.50 Common variations on this theme may be a transfer of title in the facility from the FP Contractor to the Company, either on delivery or after a fixed period of operation, with the FP Contractor’s obligations thereafter being operation and maintenance services in accordance with the company’s instructions.(ii) Design and construction
1.51 The FP Contractor would usually take on the obligation to ensure that the facility is designed and built in accordance with the agreed charterparty specification and technical requirements. Often these requirements are set out in a list of ‘functional’ specifications: a set of objectives for the performance of the facility, including minimum levels of production, product quality, storage capacity and offloading capability. The FP Contractor would be responsible for developing the functional specification through basic and detailed design, sometimes doing so by subcontracting to design consultants and a construction contractor. The Company may specify, or the FP Contractor may choose, to achieve the specification objectives either through a newbuilding vessel, designed and built for the particular field, or conversion of an existing tanker or floating production facility. Whichever option is chosen, the FP Contractor has the same responsibility to ensure the vessel is installed and capable of producing on location by the agreed charterparty cancelling date. Whether or not the FP Contractor is able to place the same burden ‘back-to-back’Page 16
(iii) Installation and acceptance
1.52 Although a substantial volume of mechanical completion, testing, commissioning and sea trials may be undertaken before the facility arrives on location, performance testing – to ensure contractual compliance with the functional specification – cannot be carried out until the facility is installed and hooked up to the reservoir. The procedure of transportation, installation and readiness for production may be a precarious time for the FP Contractor, often having to manage performance of its major subcontractors to ensure timely compliance, while facing the demands of the Company to meet its requirements, ensuring compliance with the wishes of the local state inspector and dealing with the inherent uncertainties of first production from that particular oil or gas reservoir. Anxieties may be increased by the imposition of liquidated damages for delay and even the threat of cancellation if the contractual deadline is not met. The FP Contractor may also have the additional commercial pressure of having incurred major expenditure in the construction or conversion of the facility, without being able to recover expenditure through charter payments until the facility is accepted and fully operational, and the ever-present concern that, if the FPSO charter were to be cancelled due to failure to meet its requirements, that expenditure would have been wasted. If the same vessel were to be redeployed at an alternative location, substantial further expenditure would be required in order to modify the vessel for the particular requirements of that other field. At the same time, the oil company may be wrestling with its own time constraints and interfacing with its own subcontractors to ensure its wells and subsea infrastructure, including the risers, are in a suitable state of readiness to connect to an arriving FPSO, and to provide hydrocarbons needed for performance testing.(iv) Production
1.53 The FP Contractor takes on the responsibility during the charter period to produce oil or liquefied gas to a minimum quality and quantity continuously throughout the period of service, subject only to limited periods allowed for maintenance and shutdown for the Company’s requirements. The success of the FP Contractor’s performance will of course depend on the reservoir performing as intended, and the conditions in which the facility is operating being within the parameters for which it was designed. Processing equipment designed to handle a modest amount of gas from the reservoir may struggle to achieve performance targets if a greater volume of gas is encountered. A facility designed to offload product frequently may struggle to do so if the weather conditions for offloading are worse than anticipated. Many reasons may occur which the FP Contractor may wish to rely upon to justify failure to achieve the performance targets. In many cases, the Company’s position would be that the FP Contractor has the burden of proving that thePage 17
(v) The charter period
1.56 The charter period usually commences on the date of the Company’s formal acceptance of the facility in accordance with the charter terms. Although there may have been a period of production before acceptance, perhaps including offloading of cargoes, this initial period is not counted within the charter period unless the contract specifically provides for this. If the reason for delaying commencement of the charter period falls within the Company’s responsibility, the charter may provide that the FP Contractor is compensated through standby payments, pending the commencement of payment of day rates during the charter period. 1.57 Given the uncertainties inherent in production from a new reservoir, the FP Contractor may be required to provide a facility for the life of the field, but the Company may be reluctant to commit to a lengthy minimum charter period. It follows that in many cases the FP Contractor is committing to major expenditure of the building or modification of the facility for an uncertain period of chartering operations and payment of day rates. This contrasts fundamentally with a conventional maritime newbuild project, in which a contractor would ordinarily wish to ensure that the charter period would be sufficient to enable the capital expenditure in the construction of the vessel to be recovered – and the income stream of the charter period would facilitate a contractor’s financing of its capital expenditure. Given the uncertainty of the charter period and the lack of opportunity for redeployment following termination, financing the procurement of an FPSO is considerably more difficult than for conventional vessels.34(vi) Liabilities and indemnities
1.58 Although the FPSO may operate under a form of time charter in the same way as a conventional vessel, the regime governing liability for claims for loss and damage, with the related indemnities and insurance cover, departs entirely from the conventionalPage 18
(vii) Offtake and offloading
1.59 The Company will usually take responsibility for transporting the product by scheduling suitable offtake vessels of sufficient size and frequency to allow offloading of product from the FPSO without interruption to continuous production. A common theme of FPSO operations is the strategic necessity of the efficient offloading of the FPSO in order to avoid storage tanks becoming full. The offloading process may be hazardous, involving transfer of hydrocarbons at sea between two vessels closer to each other than would normally be considered safe. Offloading operations are complex and can be undertaken only in suitable weather loading conditions. Complications are multiplied for FLNG offloading, requiring offloading of LNG cargo at −162°C into a specialist vessel, and offloading of LPG and condensates into other specialist vessels. The FPSO Contractor will take responsibility for the safety and efficiency of offloading operations, whereas the Company will take responsibility for the performance of the offtake vessels.36G Floating production in the future
1.60 Floating production has traditionally been dominated by oil production. However, offshore gas production, as a transition fuel, has increased considerably in recent years and the floating production sector is now part of the global push to reduce the impact of climate change, with a move towards renewable energy sources. 1.61 That is not to say that floating oil production is likely to cease any time soon. New projects will be (and are being) commissioned. However, decarbonisation is inevitable and as such we expect that the future will see several key changes. First, the means by which oil and gas is produced will become greener. Second, there is significant scope to use existing floating production infrastructure (e.g. FPSOs, shuttle tankers etc.) in carbon capture projects. Third, a transition from oil and gas floating production assets to other floating energy sources may be envisaged.(i) Making carbon fuel production greener
1.62 FPSOs use up considerable energy, especially in the process trains (e.g. in the heat exchangers, compressors and the centrifuges). This power is generated by using traditional combustion engines, which use gas from the reservoir, or fuel oils. However, the FPSOs of the future (either newbuilds or as converted) are likely to be different. We expect that FPSOs will switch to dual fuel/hybrid technologies (e.g. ammonia, hydrogen,Page 19
(ii) Using existing infrastructure to capture carbon
1.63 The electrification of FPSOs is still the electrification of an asset that ultimately is designed to produce carbon fuels. However, that is not necessarily the only useful application of the infrastructure surrounding the FPSOs. That infrastructure is now at the forefront of the carbon capture industry, which seeks to reverse the current logistics chain. 1.64 Instead of assets taking carbon-based products from subsea reservoirs, processing them for offtaking by shuttle tankers to refineries, the process is reversed. Carbon dioxide is collected and liquefied, and then transported to the offshore reservoirs and then pumped back, subsea, via risers and the subsea systems. 1.65 This is not as simple as it sounds. It is not simply like putting a car into reverse. As such, there is considerable scope for new designs, possible refurbishment of existing assets and newbuild projects.(iii) New floating energy sources
1.66 The most obvious example of offshore energy is offshore wind. The vast majority of these windfarms are fixed to the seabed with considerable foundations. This is a sector that has already produced significant case law in the English courts, with the 2017 ‘Robin Rigg’ case in the Supreme Court the best known.37 We cover this significant case and its impact on questions such as design risk in . But, much like offshore oil and gas production, there comes a depth where it is not feasible to have fixed wind turbines. As such the next step is the rise of floating offshore windfarms, which like FPSOs can be deployed in deep waters and can be moved if required. 1.67 Some areas are less developed, such as tidal energy. Again, there is a distinction between fixed tidal turbine systems (such as those used/planned in river estuaries) and those that float can be deployed out at sea. This latter floating technology is, like the floating wind sector, less developed. However, there are operating floating tidal turbine systems; for example, the Orbital O2 turbine anchored off the north-eastern coast of Scotland in Orkney, claimed to meet the annual electricity demands of 2000 homes for the next 15 years. 1.68 A further possibility is the production of electricity from offshore facilities using hydrogen. We hope to be able to report on how feasible that may be when we come to the second edition of Offshore Floating Production: Legal and Commercial Risk Management
1 See Altera Voyageur Production Limited v Premier Oil E&P UK Limited [2020] EWHC 1891 (Comm), , [2020] 7 WLUK 308, referred to further in Chapter 6, Section I (Performance adjustments to hire).