Advokatfirmaet Simonsen Vogt Wiig AS
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Energy & Natural Resources
For the first time, the Norwegian courts have ruled in a case regarding the scope of the parent company guarantee (PCG) for licensees on the Norwegian Continental Shelf. The Borgarting Court of Appeal recently overturned a district court judgment and largely accepted the Norwegian government's interpretation of the PCG's scope of applicability. Although the ruling, which is likely to be appealed, provides some clarity, the question of whether tax claims are covered was not resolved.
Operators and non-operating petroleum licensees on the Norwegian Continental Shelf must establish emergency preparedness and implement measures to deal with any risks to their petroleum activities. Traditionally, this emergency preparedness planning has been directed towards conventional risks, such as non-deliberate accidents and emergencies resulting from human mistakes, technical errors or weather conditions. However, cybersecurity is also becoming a major concern for the oil and gas industry.
An increased number of corporate transactions and mergers have been observed in the oil and gas sector on the Norwegian Continental Shelf (NCS) in recent years. Several oil majors and traditional utilities and downstream companies have reduced their presence and broad portfolio sales and swaps of NCS licences have become increasingly common. These changes in trends are highly relevant for the government, which aims to maintain a high level of activity on the NCS.
In 2016 the Ministry of Petroleum and Energy announced that in all future corporate transfers subject to ministry approval it would consider requiring security from the seller establishing a secondary liability for future decommissioning costs. The ministry will require any seller of a licensee or of a licensee's parent company to provide an unlimited parent company guarantee. However, questions have been raised about the robustness of the security achieved by the guarantee.
Following the recovery and stabilisation of oil prices, an increasing number of oil companies on the Norwegian Continental Shelf (NCS) are looking for new ways to advance developments by cooperating with contractors. Some companies are looking for a stronger commitment from their suppliers and have introduced a cooperation scheme whereby the parties share a greater portion of risk for profit or loss. However, a number of challenges may arise from such contractual structures with regard to NCS projects.
The Borgarting Court of Appeal recently rendered its judgment in a case of major importance for the upstream Norwegian Continental Shelf (NCS) industry, natural gas buyers in Europe and the Norwegian government. If the judgment becomes final and binding, it will benefit the European gas supply. However, it may be a rude awakening for institutional investors in NCS infrastructure.
An inexperienced operator on the Norwegian Continental Shelf with a relatively small organisation may invoke a need for non-operators to direct particular attention to the operator's contract award procedure; while reduced capacity of non-operators may affect their ability to contribute to joint venture operations and to exercise the required control. Consequently, it is essential that non-operators have sufficient available resources to fulfil their commitments.
In the early 2000s the Norwegian authorities introduced several measures to stimulate exploration and production activities on the Norwegian Continental Shelf (NCS). The number of applicants in the 2016 NCS licensing round in pre-defined (mature) areas dropped to 33 from 47 in 2014 and 43 in 2015. In light of this, it is useful to examine the existing NCS market and some of the fundamental drivers and trends looking ahead.
Any subsidiary company holding a production licence on the Norwegian Continental Shelf must provide to the Ministry of Petroleum and Energy a standard parent company guarantee (PCG) covering its obligations relating to the petroleum activities in which it participates. As the scope of the PCG and who is entitled to claim under it has been subject to discussion, this update seeks to clarifies these issues.
For many decades, the Norwegian continental shelf (NCS) has offered great opportunities for petroleum exploration and production. While many areas are now mature, virgin areas still remain. Applications for acreage in the 23rd NCS licensing round were due in November 2015. The applications submitted indicate that, despite lower oil prices and a high-cost, high-risk environment, there is still reasonable interest in exploration in the far north.
A recent dispute involving pollution caused by an onshore decommissioning facility serves as a practical example of how the last phase of petroleum production activities may have a detrimental impact on the environment and third parties, and raises the question of the scope of liability under the Petroleum Act for petroleum licensees in relation to onshore decommissioning activity.
Norwegian Total Contract 2015 Modification ('NTK 15 Mod') is a standard contract for EPC(I) offshore modification projects on the Norwegian continental shelf. In an EPC(I) contract for modification of a platform, the contractor performs engineering, procurement, construction and possibly installation of work. NTK 15 Mod is part of a standardisation process initiated by the government to facilitate cost-efficient contracting.
In 2013 petroleum activities on the Norwegian Continental Shelf were exempted from the European Economic Area and EU rules on procurement included in the EU Utilities Directive. But how often have joint ventures on the Norwegian Continental Shelf used single sourcing since the exemption was granted?