The United Kingdom and Norway have signed an energy agreement setting out the principles of a new framework treaty for cross-border oil and gas cooperation. The agreement marks an important step for the United Kingdom in addressing the predicted reliance on imported gas from 2007 and should stimulate further investment within the industry.
A recent decision on the interpretation of a force majeure clause in a contract relating to the handling and supply of crude oil shows that for a party to rely upon a 'request of a governmental authority' in a force majeure clause, such request must be made independently of the party that receives the request, and the force majeure event must be beyond the control of the affected party.
The protection of the marine environment is a matter of worldwide concern, and the oil and gas industry is subject to increasing levels of environmental control. Draft regulations and guidance notes with respect to oil discharges occurring offshore recently proposed by the Department of Trade and Industry are set to increase costs to operators offshore by as much as £150,000.
One hundred and seventy eight companies, together holding 99% of UK Continental Shelf licence interests, have signed up to the new cross-industry 'Master Deed'. This provides for two sets of arrangements to govern the legal mechanics relating to transfers of interests in offshore licence and other agreements relating to associated assets and infrastructure between companies.
Amendments have been made to the process for obtaining licence assignment consents, permissions where security rights are being created over a licence, and permissions for the creation, amendment or novation of operating agreements. The changes further implement the government's drive to introduce online services by 2005 and streamline the procedure for licence assignments.
The UK government has set the target of making all government services available electronically by 2005. The Oil and Gas Directorate intends to implement this target through the UK Oil Portal. This website will be used to issue all consents and approvals for operations of the UK Continental Shelf, as well as for monitoring returns to the government.
Key themes of the Energy Policy White Paper which the government recently published include the move towards a low-carbon economy, security and diversity of supply, competition in energy markets and affordable energy. Its proposals range from specific, short-term initiatives to long-term goals.
The Department of Trade and Industry has requested feedback on the possible introduction of a new type of licence aimed at encouraging exploration activity on the UK Continental Shelf. The 'promote' licence would provide a period of assessment in which licensees could work up potential prospects without committing to undertake seismic or drilling work at an early stage.
The Industry Mutual Hold Harmless Scheme went live on July 1 2002 with over 90 initial participants. The scheme is an industry-wide initiative under which UK Continental Shelf contractors agree to hold each other harmless for loss or damage to their people and property, even if caused by the negligence of another contractor.
The House of Lords has issued its decision in the long-running Piper Alpha litigation, which raises a number of interesting points on the drafting and interpretation of indemnities of particular relevance to the oil and gas industry as it moves toward more widespread mutual hold harmless schemes.
The Progressing Partnership Working Group, which was convened to examine commercial barriers to UK Continental Shelf development, has released its final report in which it recommends radical changes to legal and commercial practices in the UK oil and gas industry in a number of areas.