Oil operators now face historic N. Sea ‘regime change’ with MER and Collaboration Code

Don’t miss out the next time – see what you missed – details below

The UK oil and gas industry is on the verge of one of the most fundamental changes in its history when the Energy Act receives Royal Assent, according to specialist energy lawyers.

As comprehensively discussed at the Delivering MER – the Issues’ conference held last month by the Institute of Energy at Aberdeen University and Scottish Energy News – the MER Strategy became law in March and the Energy Act is likely to become law in the coming weeks. 

When it does so, for the first time ever North Sea oil companies will have to make certain key decisions based on economic analysis and not firmly established legal rules.

Legal services provider Bond Dickinson has undertaken an in-depth study of the implications of the Act and the MER (Maximising Economic Recovery) Strategy, the final version of which was published on 18 March and which is central to the Act’s powers. Key points in the firm’s analysis include:

To some considerable extent, UKCS companies will have to make investment decisions based not only on their own economic benefit but for the benefit of the “oil province as a whole”

Failure to comply with MER could have profound consequences as the OGA will have significant powers to impose sanctions ranging from financial penalties and the imposition of enforcement notices to the removal of operatorship and the revocation of licences

There are potential competition law issues arising from the collaboration which is a key part of the Strategy.

A spokesman for Bond Dickinson said the transformation of the industry’s regulatory regime, borne out of Sir Ian Wood’s landmark N. Sea Oil and Gas Review on how to make the most of the huge opportunity the UKCS continues to offer, poses an enormous challenge.

She said: “It is radical and ground-breaking and heralds the creation of an extensive new regulatory structure. The MER strategy is innovative but it is also a complex and sometimes controversial document. It is a unique, one-off legal document, and represents the first time a set of business principles have become law in this way. 

“It will be vital for oil companies to stay abreast of the rapid developments taking place and fully understand how MER will impact them.

“Failure to understand this could have important consequences as the OGA will have significant powers from demanding data generated by oil companies to imposing a wide range of sanctions including financial penalties and revocation of licences.

“The long term future of the UK North Sea oil and gas industry, which is so vital to ensuring that the North-east of Scotland retains the expertise to make it a respected international hub, depends on the success of the OGA and the Strategy.

While it is visionary, it may well create some legal headaches in the months ahead. For example, we are already being asked questions relating to late life/decommissioning infrastructure and whether precedence will be given to extending life to achieve MER or minimising cost by closing loss-making fields.”

Catch up on what you missed at DELIVERING MER and the Collaboration Code:The Issues:

Speaker’s presentations at the unique and ground-breaking conference held on 14 April 2016 by Aberdeen University’s Institute of Energy (in collaboration with Scottish Energy News) are now available for downloading.

Kathryn Fowler, Deputy Executive Director, Institute of Energy at the University of Aberdeen, said: “Attendees can now access and download copies of the speaker’s presentations as they were delivered on the day at:

http://www.abdn.ac.uk/energy/events/mer2016-205.php

“The only exception to this is the Plenary presentation by Paul Goodfellow from Shell UK, which is restricted to delegates-only. 

“We hope that  everyone who attended thoroughly enjoyed this event and that the day stimulated thinking and discussion around this critical issue.

“We anticipate running similar events in the future and hope that all colleagues will be interested in attending them.”

 

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