The Oil and Gas Authority (OGA) has opened an investigation into the proposed sale by Esso Exploration & Production Ltd (EEPUK) of 13 producing fields, specifically Elgin Franklin, to NEO, amid concerns it is not progressing as quickly as expected.
The OGA has previously voiced its concerns generally about transaction drag and the chilling effect it could have on the market and, as negotiations, which began in February 2021, have not yet reached a conclusion, has opened an investigation.
The consent of joint venture partners is required in order to effect the transfer. TotalEnergies E&P UK Limited (Total) is the operator of Elgin Franklin. There are eight joint venture partners in Elgin Franklin, including Total and EEPUK.
Collaboration is an obligation in the OGA Strategy and failure to comply with that obligation is sanctionable under the Energy Act 2016.
The OGA Strategy states that in undertaking relevant activities relevant persons must collaborate and co-operate with others who are seeking to acquire an interest or invest in offshore licences or infrastructure.
The OGA conducted a Thematic Review in October 2020 into Industry Compliance with Regulatory Obligations. It examined compliance in six areas of interaction between the OGA and licensees, identified some very good, and improving, practice, but also noted the need for further improvement and warned that sanctions could follow in cases where breaches were found.
This Review followed a June 2019 OGA letter to licensees and infrastructure owners which outlined the OGA’s regulatory approach. While praising a great deal of constructive engagement, the letter noted that ‘too many issues [were] taking too long to resolve’ and warned that ‘we will be progressively more proactive in using the OGA’s powers’.
The investigation will now examine the engagement between the parties since EEPUK and NEO Energy announced the proposed transaction in February 2021. This includes serving the parties with information notices which ask them to account for their actions since the transaction was proposed.
The opening of an investigation does not prevent the proposed transaction from progressing and everyone with interests connected to the transaction must still meet their obligations under the OGA Strategy and industry voluntary codes of practice.
Notes to editors:
- EEPUK is divesting a portfolio of assets to NEO. The EEPUK press announcement, which was published under the name of ExxonMobil, reads: “The agreement includes ownership interests in 14 producing fields operated primarily by Shell, including Penguins, Starling, Fram, the Gannet Cluster and Shearwater; Elgin Franklin fields operated by Total; and interests in the associated infrastructure. ExxonMobil’s share of production from these fields was approximately 38,000 oil-equivalent barrels per day in 2019.” (one of the 14 fields has subsequently been removed from the package)
- The investigation has been launched under the OGA’s Sanction Procedure
- The OGA has the duty to regulate the industry and has communicated to industry the strategic significance the OGA places on regulatory compliance to support industry’s “social licence to operate”.
- ‘This cannot continue’: OGA ready to wield powers to conquer transaction drag
- Follow us on Twitter at @NSTAuthority
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