Is a FPSO a ship?

The High Court has ruled that Singaporean flagged vessel Umuroa (Grt 71,142) cannot disconnect the pipes linking the vessel to the oil wells in the Tui field off the coast of Taranaki on New Zealand’s east coast for the time being.

The Tui field is situated in the waters of New Zealand’s Exclusive Economic Zone approximately 50km offshore from Taranaki. BW Offshore Singapore Pte. Ltd. own the Floating Production Storage and Offtake (FPSO) installation Umuroa and moorings and anchors that connect the Umuroa to the seabed in the Tui area. BWO was contracted to Tamarind Taranaki Limited (now in liquidation) until late 2019. BWO sought to disconnect and sail the Umuroa.

The Umuroa is connected to structures (referred to by BWO as sub-sea equipment), submarine pipelines (referred to by BWO as production risers and gas lift risers, and the hydraulic umbilical) and submarine cables in the Exclusive Economic Zone, but outside New Zealand’s Territorial Sea.

In 2017, the New Zealand Environment Protection Agency (EPA) ruled that it would allow disconnection on the basis that the disconnection would be temporary until a new FPSO was connected. BWO, relying on that decision started the work in November 2019.  The EPA issued abatement notices to stop the disconnection - noting that circumstances had changed since the 2017 as decommissioning the whole field was not contemplated at the time and that the company that owns the pipework has gone into liquidation calling into question its ability to deal with the pipework to be left on the seafloor. Further there were concerns about the current state of the undersea equipment.

BWO appealed against the abatement notices stopping the disconnection to the Environment Court. The Environment Court (Judge Dickey) found in favour of BWO finding that it was satisfied the disconnection works proposed by BWO are not inconsistent with the 2017 Ruling and granted a stay of the abatement notice.

The EPA appealed the Environment Court’s decision and at the same time applied for a stay in the High Court.

High Court Justice Francis Cooke allowed the EPA’s appeal, and restored the abatement notices. In his decision, his Honour said that the EPA's hands could not be tied to allow adverse effects to take place based on an earlier decision that had been given in different circumstances. He highlighted the recent TTR Court of Appeal decision and its affirmation that under the EEZ Act, protecting the environment from pollution is a “bottom line”.

The decision means that BWO must leave the Umuroa tethered until it is determined that it may commence disconnection.  The court was told that if the vessel stays in the oil field over winter it will be unmanned, and perhaps uninsured.  This raised the spectre of a ‘ghost’ ship, unmanned, tethered on ageing moorings, with about 40,000 barrels of oil aboard during winter. 

Evidence heard in the TTR case before the EPA in 2017 showed that during winter, significant waves heights of up to 5 meters are not unusual in that area. 

The High Court decision was an assessment of whether the Environment Court was wrong in law in its approach.  Accordingly, there was no assessment of all the technical matters that could be relevant as this will be for the Environment Court to decide at a later hearing.

A question that appears not to have been traversed in either the Environment Court or the High Court was whether the FPSO was a ‘ship’ or an ‘offshore installation’ as different management regimes apply to each.

If a ship, the master has final authority to control the ship. The master is responsible for compliance with all relevant requirements of the flag state. In New Zealand s19 of the Marine Transport Act 1994 (MTA) allows the master to determine that the risks to the vessel and crew constitute an emergency and that in the interests of safety of the vessel and its crew, a disconnection of the pipes and mooring lines was necessary- notwithstanding the existence of the abatement notice.

If the FPSO is an offshore installation, and ‘master-less’ and therefore without the rights and duties under s19 of the MTA, then could the owners themselves make the call to disconnect the vessel and then defend themselves against a prosecution for their actions on similar grounds.

The decision highlights a need for clarity on which international regime would govern the operation of FPSOs such as the Umuroa. For example would the limitation of liability regime applicable to ships in a conventions such as the International Convention on Limitation of Liability for Maritime Claims (LLMC) which covers claims arising from death and personal injury occurring on board apply to a FPSO, as a “Ship” is not defined in LLMC.

Further, does the International Convention on Civil Liability for Oil Pollution Damage (CLC) which imputes strict liability on the owner of a ship for loss or damage caused by the escape of oil from a ship but allows the owner to limit their liability, cover the operation of FPSOs? There is a complex definition of a ship in CLC which suggests that any seagoing vessel and seaborne craft of any type whatsoever, constructed or adapted for the carriage of oil in bulk as a cargo and other cargoes can be regarded as a ship (my paraphrase).  

There are cogent arguments that can be brought suggesting that a FPSO is not a ship, but then does the owner lose the ability to limit its liability?

Ultimately whether the vessel is a ship, or a fixed installation will turn on the peculiar facts of the case, and the design and purpose of the vessel. The Umuroa looks like a ship, has propulsion systems (currently inoperative) and a rudder, and it is capable of navigation. This suggests it should be regarded as a ship. In which case, the master could (in an emergency) ignore the abatement notice.

Read or listen to the RNZ article of 13 May Oil tanker with 40,000 barrels waiting months off Taranaki coast in which Peter Dawson was interviewed on the complexities of the rules around this matter.