Amendment To Energy Bill 2008 - Proposals For Oil And Gas Decommissioning

Author:Ms Judith Aldersey-Williams
Profession:CMS Cameron McKenna LLP
 
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The government has made an amendment to the Energy Bill 2008 limiting the application

of Sections 29 and 34 of the Petroleum Act 1998 ("the

Act") in certain instances. The intention is to allow

parties to the licence whose beneficial interest is confined to

one area to escape liability for decommissioning in another

area. However, there are concerns that the amendment may not be

totally effective.

Background

Currently under the Act, (as proposed to be amended by the

draft Bill) the Secretary of State may by a written Section 29

notice require the submission of a costed decommissioning

programme for each offshore installation and submarine pipeline

from a range of persons, identified under Section 30 of the

Act, including, in effect, licensees, operators, owners of

installations/pipelines, those bodies corporate associated with

them, and those persons who have transferred their licence

rights, but have not obtained a necessary consent required

under the licence in relation to the transfer. If a Section 29

notice has been served on a person and withdrawn or, even

though it was never served, it could have been served on a

person, then such person may be drawn back into the liability

net for decommissioning costs by virtue of Section 34 of the

Act.

Divided Licences

The amendment attempts to deal with the issue of potential

liability of 'Area A' owners for the decommissioning of

an installation in 'Area B', which is governed by the

same petroleum production licence as Area A, but in which the

'Area A' owners hold no beneficial interest. This may

happen as a result of assignment or sole risk development. In

such a situation the two groups of owners are all still party

to the same production licence under which the rights are held

joint and severally and so are indivisible, but each group

agrees, usually in a trust deed, not to exercise those rights

in the other area.

Under the terms of the Act, various categories of person can

be made liable for decommissioning an installation - among them

are persons who "have the right to exploit or explore

mineral resources in any area" where such exploitation is

carried on from the installation in the exercise of this right.

The owners of Area A have the right to exploit or explore

mineral resources in the whole licence area by virtue of the

licence even if they have by contract agreed with the owners of

Area B that they will not exercise that right in Area B. The

right, shared with the Area A owners, is...

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