The Regulatory Scheme Applicable to Floating Production, Storage, and Offloading Systems

Abstract

Abstract There has been increasing discussion in recent months regarding the possibility of using Floating Production, Storage, and Offloading (FPSO) systems as an oil and gas development option on the United States (U.S.) Gulf of Mexico outer continental shelf (OCS). Operators interested in using FPSOs in the U.S. sector of the Gulf of Mexico will have to obtain regulatory approval from the U.S. Department of Interior, Minerals Management Service (MMS). In addition, FPSOs proposed for use on the U.S. OCS will be required to meet specific vessel design and operational regulations administered by the U.S. Coast Guard. The U.S. Coast Guard recently stated that the Oil Pollution Act of 1990 (OPA 90) requirements for tank vessels apply to U.S. and foreign flag FPSOs proposed for use on the U.S. OCS. Consequently, operators considering use of an FPSO will need to work closely with the U.S. Coast Guard to determine whether OPA-90 double hull construction requirements apply to their vessels. The use of single hull FPSOs on the U.S. OCS may not be possible in certain cases. Introduction This paper focuses on the regulatory scheme applicable to FPSOs designed for possible use on the U.S. OCS. This paper strictly reflects the opinions of the authors and does not represent the official position of the U.S. Coast Guard or the U.S. MMS. Requests for official determinations regarding regulatory requirements applicable to FPSOs proposed for use on the U.S. OCS should be referred in writing to the appropriate agency. Builders, designers and operators of FPSOs intended for use on the U.S. OCS are strongly urged to seek necessary regulatory clarifications and approvals before proceeding beyond the conceptual stage. Background. FPSOs have been in use worldwide for almost twenty years. One recent estimate placed the number of operational FPSOs at forty-five.1 There are currently no tanker based FPSOs or floating storage and offloading (FSO) systems installed in U.S. navigable waters or on the U.S. OCS. The only previous tanker based FPSO or FSO to operate in the U.S. was Exxonanns Santa Ynez Offshore Storage and Treatment (OS&T) vessel. This tanker based floating production system operated in 500 feet of water 3.9 miles offshore of the U.S. California coast from 1981 until it was removed in 1994. The first use of a tanker based FPSO or FSO in the Gulf of Mexico occurred in August 1998 when Pemex installed the huge Ta'kunta unit in the Cantarell field in the Bay of Campeche.1 Recently, there has been considerable discussion within the U.S. offshore industry regarding the possibility of using tanker based FPSOs as a development option in the deepwater U.S. Gulf of Mexico. Operators who propose to use a FPSO as a field development option on the U.S. OCS must meet the regulatory requirements imposed by both the U.S. MMS and the U.S. Coast Guard. A Dual Regulatory Approach The USCG and MMS have overlapping jurisdiction concerning FPSOs. The U.S. MMS is responsible for granting OCS leases, approving OCS development plans, and collecting royalty payments from OCS oil, gas, and other mineral production. The MMS has exclusive jurisdiction over the design and structural adequacy of fixed, bottom founded, OCS facilities. This includes jurisdiction over the well and any associated marine riser system. The MMS also has specific requirements that apply to FPSOs and other floating production systems that operate on the U.S. OCS. The MMS regulations governing OCS operations are located at Title 30 U.S. Code of Federal Regulations (CFR), Subchapter B.