On a mission to boost North Sea production, UK moves to address delays in buying and selling of oil & gas assets
UK’s regulator North Sea Transition Authority (NSTA) has put the wheels into motion to speed up North Sea oil and gas production by proposing the removal of barriers to investment, as the security of energy supply and improved production is expected to result from greater industry co-operation.
The North Sea Transition Authority’s consultation on new guidance – disclosed on Wednesday, 29 March 2023 – aims to sweep away blockers to transactions and streamline the buying and selling of assets, in a bid to assist the industry in its role of ensuring the security of domestic energy supply.
As operators and licensees are worried about transaction delays, which can damage working relationships, increase costs and hold up operational and strategic decisions, the NSTA was asked to look into the situation. Therefore, the regulator learned of licensees and potential investors who have been frustrated by challenges they have encountered either during, or because of, licence assignments.
Jane de Lozey, NSTA Director of Regulation, remarked: “The UKCS has a rich history of successfully welcoming new investors to the basin. These investors have brought new capital, new ideas and new vigour; the NSTA wants this to continue to support the UK’s need for energy security.
“Some transactions have been delayed or even jeopardised by buyers and sellers failing to engage Joint Venture partners early enough and the new guidance will provide clear actions to take and when to take them, to ensure that production is maximised.”
The concerns that the NSTA became aware of relate to matters such as operational activities and capital projects being slowed, blocked transactions having a knock-on effect on North Sea production, concerns over decommissioning cost exposure delaying deals, and excessive co-venturer requirements tying-up capital that could be used productively elsewhere in the basin.
To tackle this, the NSTA’s consultation will address these and other related issues, allowing licensees and investors to share their thoughts on matters including how best to strike a balance between market liquidity and preserving investor confidence, the role of self-regulation and what the regulator’s guidance on licence assignments should include.
As a result, the proposals in the draft guidance cover agreeing on a transaction project plan at an early stage, including the resources needed to efficiently and effectively implement the project plan; preparing a capability pack – created by the buyer and seller to inform Joint Venture (JV) partners of key corporate, technical and financial information the JV requires to reach a decision; agreed timelines with milestones; candid, open, constructive negotiations; and proportionate security arrangements to meet decom liabilities.
Moreover, the NSTA explained that a series of workshops with senior industry representatives were held in London and Aberdeen before the consultation opened. The opinions expressed in those meetings have informed the draft guidance, thus, the consultation will be open until 23 May 2023 with the new guidance to be published later in the year.
The North Sea Transition Authority has also been working on putting new measures in place to bring down the waste of gas and make the United Kingdom’s oil and gas production cleaner.
These efforts seem to bear fruit, allowing the UK to reap the rewards, as the North Sea flaring has been cut in half, following four consecutive years of reductions.