The European Union's Potential Contribution to Enhanced Governance of Offshore Oil and Gas Operations in the Arctic

• Author: Nengye Liu
• Date: 01 July 2015
• DOI: http://doi.org/10.1111/reel.12111
• Published date: 01 July 2015

The European Union’s Potential Contribution to

Enhanced Governance of Offshore Oil and Gas

Operations in the Arctic

Nengye Liu*

This article focuses on the potential contribution of the

European Union (EU) to an enhanced legal regime for

Arctic offshore oil and gas operations. It first briefly

describes existing international law for the regulation

of offshore oil and gas operations in the Arctic. The

article then discusses the development of the EU’s

Arctic policy and the EU’s competence to regulate

Arctic offshore oil and gas activities. Subsequently, it

analyses potential actions and initiatives that could be

taken by the EU to promote high safety standards for

offshore oil and gas operations in the Arctic.

INTRODUCTION

According to a widely cited United States Geological

Survey report, about 13% of the world’s undiscovered,

technically recoverable oil and up to 30% of global gas

reserves are in the Arctic, of which 84% is offshore.1

This may not be good news for the Arctic marine envi-

ronment. As demonstrated by the Deepwater Horizon

disaster in the Gulf of Mexico,2there are significant

risks associated with offshore oil and gas activities in

marine ecosystems. The release of oil through accidents

or operations of offshore platforms could cause signifi-

cant damage to a fragile marine ecosystem like the

Arctic. This could occur through spills from accidental

blowouts at the well; accidents involving tankers trans-

porting oil and gas; operational pollution from offshore

installations, harbours and from oil tankers; accidental

releases from storage or during offloading; or dis-

charges from pipelines.3

Exploration and development in the Arctic requires

expensive, tailored technologies as well as safeguards

adapted to the extreme climatic conditions.4The lack of

existing infrastructure and the likely high cost of any

development in geographically remote and climatically

harsh conditions mean that the economics of any new

project will depend to a large extent on the size of dis-

coveries and the oil price, which, in turn, will be

impacted by the development of other sources of oil

supply (for example, United States (US) unconven-

tional oil) and alternative energies.5

However, as long as global energy demand continues to

increase and fossil fuels remain the world’s primary

energy source,6it appears inevitable that humans will

start drilling in the Arctic for oil and gas.7In fact, a

number of companies have already been pursuing

exploration projects in Arctic waters. Examples include

Shell in the Chukchi and Beaufort Sea; Cairn in offshore

Greenland; Rosneft/ExxonMobil in the Kara Sea; and

Rosneft/ENI in the Russian Barents Sea.8Therefore,

the key issue for offshore oil and gas operations in the

Arctic is to create a legal regime that strikes a balance

between possible adverse environmental consequences

(e.g. oil spills) in the offshore Arctic and the economic

benefits from hydrocarbon development.9

There is no doubt that the EU has become a global

actor. The global or international context in which the

* Corresponding author:

Email: nengye.liu@gmail.com

1K.J. Bird et al., ‘Circum-Arctic Resource Appraisal: Estimates of

Undiscovered Oil and Gas North of the Arctic Circle’ (United States

Geological Survey, 2008), found at: <http://pubs.usgs.gov/fs/2008/

3049/fs2008-3049.pdf>.

2United States Coast Guard, Report of Investigation into the Circum-

stances Surrounding the Explosion, Fire, Sinking and Loss of Eleven

Crew Members aboard the Mobile Offshore Drilling Unit Deepwater

Horizon in the Gulf of Mexico, April 20–22, 2010 (United States Coast

Guard, 2011).

3Arctic Council, ‘Arctic Guide: Information on Emergency Systems

and Contact Points, Overview of Environmental Risks, and Applicable

Agreements’ (2008), found at: <http://www.arctic-council.org/eppr/

completed-work/oil-and-gas-products/arctic-guide/>.

4Wilson Center, Opportunities and Challenges for Arctic Oil and Gas

Development (Wilson Center, 2014), at 3.

5J. Henderson and J. Loe, The Prospects and Challenges for Arctic

Oil Development (Oxford Institute for Energy Studies, 2014), at 1.

6It is projected that global energy demand will increase by one third

from 2011 to 2035. Demand grows for all forms of energy, but the

share of fossil fuels in the world’s energy mix may fall from 82% to

76% by 2035. See International Energy Agency (IEA), ‘World Energy

Outlook 2013 Factsheets, How Will Global Energy Markets Evolve to

2035?’ (IEA, 2013).

7A. Neslen, ‘Europe Rejects Ban on Arctic Oil Drilling’, The Guardian

(10 October 2012).

8M. Luszczuk et al., ‘Developing Oil and Gas Resources in Arctic

Waters’, in: A. Stepein, T. Koivurova and P. Kankaanpaa (eds.),

Strategic Assessment of Development of the Arctic (Arctic Centre,

University of Lapland, 2014), 71, at 76.

9K. Hossain and T. Koivurova, ‘Hydrocarbon Development in the

Offshore Arctic: Can it be Done Sustainably?’, 10:1 Oil, Gas and

Energy Law (2012), 3.

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Review of European Community & International Environmental Law

RECIEL 24 (2) 2015. ISSN 2050-0386 DOI: 10.1111/reel.12111

© 2015 John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.

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