Compliance with health, safety and environmental laws and regulations that apply to Statoil's operations could materially increase our costs. The enactment of such laws and regulations in the future is uncertain.
We incur, and expect to continue to incur, substantial capital, operating, maintenance and remediation costs relating to compliance with increasingly complex laws and regulations for the protection of the environment and human health and safety, including:
- Costs of preventing, controlling, eliminating or reducing certain types of emissions to air and discharges to the sea, including costs incurred in connection with government action to address the risk of spills and concerns about the impacts of climate change;
- Remediation of environmental contamination and adverse impacts caused by our activities or accidents at various facilities owned or previously owned by us and at third-party sites where our products or waste have been handled or disposed of;
- Compensation of persons and/or entities claiming damages as a result of our activities or accidents; and
- Costs in connection with the decommissioning of drilling platforms and other facilities.
For example, under the Norwegian Petroleum Act of 29 November 1996, as a holder of licences on the NCS, we are subject to statutory strict liability in respect of losses or damage suffered as a result of pollution caused by spills or discharges of petroleum from petroleum facilities covered by any of our licences. This means that anyone who suffers losses or damage as a result of pollution caused by operations in any of our NCS licence areas can claim compensation from us without having to demonstrate that the damage is due to any fault on our part.
Furthermore, in countries where we operate or expect to operate in the near future, new laws and regulations (such as the offshore safety regulation proposed by the European Commission on 27 October 2011, if such regulation is adopted by the European Economic Area), the imposition of stricter requirements on licences, increasingly strict enforcement of or new interpretations of existing laws and regulations, the aftermath of operational catastrophes in which we or members of our industry are involved or the discovery of previously unknown contamination may require future expenditure in order to, among other things:
- Modify operations;
- Install pollution control equipment;
- Implement additional safety measures;
- Perform site clean-ups;
- Curtail or cease certain operations;
- Temporarily shut down our facilities;
- Meet technical requirements;
- Increase monitoring, training, record-keeping and contingency planning; and
- Establish credentials in order to be permitted to commence drilling.
In particular, following the BP Deepwater Horizon oil spill in the US Gulf of Mexico, a number of regulatory changes were instituted in the US, such as the requirement to develop and implement a safety and environmental management system (SEMS programme), the drilling safety rule and the workplace safety rule. In 2011, the US authorities issued guidance to the SEMS programme. Furthermore, on 11 January 2011, the US National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling released its final report that set forth a number of recommendations for changes in environmental laws and regulations for offshore operations in 2010. The US government may choose to implement some of these recommendations, which could result in delays in obtaining drilling permits, approvals of exploration or oil spill response plans. Compliance with any additional regulatory requirements could require us to incur significant costs. Any such changes, delays or recertification could have a material adverse effect on our operations, results or financial condition. See also Operational ReviewOperational Review.
Compliance with laws, regulations and obligations relating to climate change and other environmental regulations could result in substantial capital expenditure, reduced profitability as a result of changes in operating costs, and adverse effects on revenue generation and strategic growth opportunities. In addition, many of our mature fields are producing increasing quantities of water with oil and gas. Our ability to dispose of this water in environmentally acceptable ways may have an impact on our oil and gas production. Our investments in oil sands, shale gas and unconventional resource technologies, such as hydraulic fracturing, also may cause us to incur additional costs as regulation of these technologies continues to evolve which could affect our operations and profitability with respect to these operations.
If we do not apply our resources to overcome the perceived trade-off between global access to energy and the protection or improvement of the natural environment, we could fail to live up to our aspirations of zero or minimal damage to the environment and of contributing to human progress.
The formation of a competitive internal gas market within the European Union (EU) and the general liberalisation of European gas markets could adversely affect our business.
The full opening of national gas market arrangements, set out in Directive 2003/55/EC, represents the formation of a competitive internal gas market within the EU. The regulations have been in effect since 3 March 2011. In order to reach the goals set out in the directive, the European Commission proposes to separate production and supply from transmission networks, to facilitate cross-border trade in energy, stronger powers and independence of national regulators, to promote cross-border collaboration and investment, greater market transparency in network operation and supply, and increased solidarity among the EU countries.
Most of our gas is sold under long-term gas contracts to customers in the EU, a gas market that will continue to be affected by changes in EU regulations and the implementation of such regulations in EU member states. The general liberalisation of EU gas markets could affect our ability to expand or even maintain our current market position or result in a reduction in prices in our gas sales contracts.
Directive 2003/55/EC sets forth the right of third parties to non-discriminatory access to networks and to LNG and gas storage facilities. Increased access to markets has a downside insofar as it increases network access for all market participants and, therefore, competition for capacity at interconnection points within the EU. This may result in upward pressure on the price we pay for capacity at those points.
The EU initiative that is likely to impact the gas market is a scheme for greenhouse gas emission allowances trading for the cost-effective reduction of such emissions. This strengthens and extends the Emissions Trading Scheme (ETS). The Community-wide quantity of carbon allowances issued each year will decrease in a linear manner from 2013. The ETS can have a positive or negative impact on us, depending on the price of carbon, which will consequently impact the development of gas-fired power generation in the EU.
A further focus area of EU energy policy is supply security, which has led to increased focus on projects that diversify gas supplies to the EU. As a result, the Caspian region, where Statoil is participating in the Shah Deniz field, has received increasing attention from the EU. Solutions aimed at bringing Caspian gas to Europe continue to receive political support from the EU in an attempt to resolve the complex transportation issue in the region.
Political and economic policies of the Norwegian State could affect our business.
The Norwegian State plays an active role in the management of NCS hydrocarbon resources. In addition to its direct participation in petroleum activities through the State's Direct Financial Interest (SDFI) and its indirect impact through tax and environmental laws and regulations, the Norwegian State awards licences for reconnaissance, production and transportation, and it approves, among other things, exploration and development projects, gas sales contracts and applications for (gas) production rates for individual fields. A license may be awarded for lower production than expected, and the Norwegian State may, if important public interests are at stake, also instruct us and other oil companies to reduce petroleum production. Furthermore, in the production licences in which the SDFI holds an interest, the Norwegian State has the power to direct petroleum licensees' actions in certain circumstances.
If the Norwegian State were to take additional action under its extensive powers over activities on the NCS or to change laws, regulations, policies or practices relating to the oil and gas industry, our NCS exploration, development and production activities and the results of our operations could be materially and adversely affected. For more information about the Norwegian State's regulatory powers, see Operational Review - Applicable laws and regulationsOperational Review - Applicable laws and regulations.