As from 1 October 2016, the Energy Act 2016, and Regulations made under it, transferred certain functions from the Secretary of State for Energy and Climate Change (now the Secretary of State for Energy Security and Net Zero) to the Oil and Gas Authority.
These include the licensing function conferred by the Petroleum Act 1998 insofar as it affects existing licences. Consequently, any legal agreement that would previously have named the Secretary of State for Energy and Climate Change (which includes any Deed of Licence Assignment) must correspondingly name the Oil and Gas Authority instead (and all pre-existing agreements are deemed to refer to the OGA as necessary). If you have any queries, please email them to email@example.com .
A company that is party to a licence may wish to sell its interest, or a part of it, to another company. It requires the NSTA’s permission to do so.
Any transaction in which one or more companies enters a licence, and/or one or more companies withdraws from it, is referred to in this guidance as a licence assignment.
Licence assignments are prohibited unless they have the prior consent of the NSTA. We will consider any assignment made without prior consent as a very serious breach of the model clauses attached to every licence, and as grounds for immediate revocation of the licence or to reverse the assignment using powers granted in the Energy Act 2008 (s76). This applies equally to assignments between unaffiliated companies, to assignments between sister companies within a single company group, and to the withdrawal of a company from a licence.
Offshore and Onshore licence assignment applications are processed through the UK Energy Portal using the [Petroleum E-business Assignment and Relinquishment System, for which guidance can be found here]
In processing applications, the NSTA Licensing Team routinely consults colleagues within the NSTA and, where offshore licences are concerned, from DESNZ and HSE in pursuit of the Offshore Safety Directive. We may also circulate details to HM Revenue & Customs (HMRC).
If there are no reasons to withhold it, the NSTA will approve the assignment for execution by the applicant. We require notification of legal completion so that accurate records can be maintained and will not consider an assignment to be effective until we are satisfied with the validity of the documentation.
By very rare exception, licence assignment applications can be submitted using the Licence assignment application form (MS Word Document, 83.5KB). The form must be fully completed and in accordance with the guidance notes for licence assignment application (MS Word Document, 33KB). Submit completed forms to firstname.lastname@example.org
The model clauses contain no prescription as to what the NSTA should take into consideration when deciding whether to consent to an assignment. Therefore, in making that decision, the NSTA will assess whether the aggregate impact of the assignment on its statutory functions and duties is positive (or neutral). The assessment will take into account all relevant factors, including those set out below.
The following areas will be examined when considering each assignment:
We will consult DESNZ and HSE about assignments that change the parties to an offshore licence.
Financial capacity will be a greater concern if significant decommissioning costs are likely to be incurred by licensees. We must be confident that decommissioning liabilities can be met thereby maintaining the UK as a stable, and attractive, location for investment.
We will not approve an assignment if it would leave any operations without an approved operator. Applicants should allow time in their plans for the NSTA to consider operator approvals.
This is not usually a concern for the NSTA but we might look carefully at a case in which one company gains a completely dominant position on a licence, or where one company has such a small interest that it is not motivated to participate in exploiting the licence but yet can block work.
We have no objection, in principle, to assignments to a sister company but if they are made specifically to dispose of the licence interests via a corporate sale, the NSTA will want to know who the buyer is before approval is granted. Where the reason for the assignment is tax related, we recommend that applicants discuss with HMRC in the first instance. We may inform HMRC of assignment applications as we receive them.
In some circumstances the creation of very small licence interests may be of questionable advantage to the UKCS. It may, for instance, prejudice the licence group’s attempts to agree on new work by introducing new voices. However, such drawbacks may be outweighed by a new licensee’s expertise or experience. As a general rule, the NSTA suggests any licensee seeking to create small licence interests (under 5%) should justify the transaction in the ‘extra information’ section of the application form.
This is a conceivable rather than routine issue, but the NSTA might be concerned if, for instance, it seemed an infrastructure owner was seeking to enter a licence group to influence tariffing negotiations.
The NSTA expects all offshore operators to be members of OPOL and to register each of its separate operatorships.
From time to time, should a specific need arise, the NSTA will publish policy positions. These are brief statements to set out or clarify the NSTA’s objectives and considerations in relation to a specific issue.
The current licensee needs permission to make the assignment so it is usually the assignor that needs to apply to the NSTA, even though in many cases much of the information the NSTA needs will come from the acquiring company. Consent will not be granted unless the NSTA has all required information.
Assignment consents and operator approvals are valid for three months; if completion is delayed beyond three months the approval will require re-issue. We will generally consider requests for consent re-issue on receipt of a revised 'Planned Completion Date' and confirmation that the details in the original application are still valid. The NSTA reserves the right to refuse a request for extra time in which case the applicant may be required to submit a new application.
For further information on re-issuing of consents please refer to the PEARS User Guidance.
Information and samples plans
An Information and Samples Plan must be submitted, and approved, by the NSTA before legal completion of the assignment occurs. Further guidance is available here.
Consent for assignment is conditional on the Deed of Assignment substantially conforming to a draft approved by the NSTA. There are currently two such approved drafts. The first is contained in the Master Deed, which sets out agreed assignment procedures and forms. LOGIC offers guidance on using the Master Deed. The alternative is the Approved Model Deed of Assignment (MS Word Document, 1 page, 37KB).
If a company chooses to use this method, it can only depart from it in ways that do not materially alter its effect (for instance, the company names can be moved to a Schedule). It does not include execution or attestation clauses, which should be added as required. The company can disapply the Contracts (Rights of Third Parties) Act 1999 in relation to the deed, and/or provide for the execution of the deed in counterpart. It must also decide whether jurisdiction should lie with the English, Scottish or Northern Irish courts (refer to the Civil Jurisdiction (Offshore Activities) Order 1987 (1987/2197).
Use of either of the approved drafts is not compulsory, but if a company wants to use a different draft it must submit a copy in advance because it will need to be considered by the NSTA's lawyers, and that will considerably increase our processing time.
Please remember to confirm completion of your transaction by uploading to PEARS relevant execution documents which evidence the assignment has taken place (e.g. Deed of Assignment; Deed of Interest Assignment; JOA Novation). For further information, please refer to the PEARS User Guidance.