UKCS Offshore Licensing
The licensing system in the
UK Continental Shelf (UKCS) has been active for over 40 years.
The area of the UKCS has been defined over the years under
the
Continental Shelf Act, 1964.
The Petroleum Act, 1998 states that all rights to UK petroleum sources belong to the
Crown, however
BERR (formerly DTI) have permission to grant licences to ‘search
and bore for and get’ petroleum.
Licences are granted in the
form of a deed. In legal
terms there is only one licensee, however this may be represented by
several companies who share the benefits and liabilities from the
operations conducted under the licence.
Licences carry a rental (or annual fee) which are due on the
anniversary of the licence award and are in place to encourage
companies only to hold onto acreage which they will actually
exploit.
The terms or phases of a
licence tend to represent the stages of
exploration, appraisal
development
and production.
‘Multiblock licences’ refer to offshore blocks which are
geographically scattered as opposed to adjacent.
However, BERR have decided to cease issue of these.
Mandatory relinquishments at the end of the Initial Term
create part blocks, the open parts of which are available for
re-licensing. For commercial
and operational reasons the Licensees may have defined sub-areas
(not related to the Licensing process) which may create
complications where further partial relinquishments are requested.
An updated map of licensed
areas on the UKCS is available from the
DEAL website.
There are two broad
categories of licence:
Exploration and
Production.
-
Exploration licences are sought by
companies who wish to explore large areas of the seabed for
seismic survey opportunities.
Licences are non-exclusive and valid for three years
(extendable for a further three years) and enable access for
surveying and shallow drilling over areas which are not currently
covered by a Production licence.
(Although, with permission, surveys can extend into these
licensed areas).
-
Production
Licences are required by anyone who wishes to exploit UKCS oil and
gas resources and are categorised into:
Traditional,
Promote and
Frontier licences.
Production licences span the entire process from exploration to
decommissioning.
These licences give exclusive rights to the licensee.
Licensees must supply regular updates to BERR and separate
consents are required for significant activity and developments.
Licensing Rounds:
Preparation
Offshore licences were first
granted in 1964 and BERR (formerly DTI) currently aim to hold one
offshore licensing round per year.
The 25th Round, awards were announced in
Q4 2007 and
the information regarding licences awarded in this round can be
accessed from BERR
here.
All areas of the UKCS that
have undergone a Strategic Environmental Assessment (DEAL)
are offered up for licence every year, including all blocks recently
relinquished. Ahead of
each licensing round, BERR conducts a review of fallow licences with
a view to completing relinquishments and including these areas
within the forthcoming round.
Licensing Rounds:
Applications
Round information is
published annually in the EU Official Journal and on the BERR
website (click
here).
Applications must be received within 90 days after publishing
and should include information about the company’s: background;
technical capacity; geological case; finances and environmental
competence.
Whilst the vast majority of
seaward production and exploration licences are awarded in rounds,
BERR are willing to accept out of round licence applications in
extenuating circumstances.
Further information can be found
here on the BERR website.
Click
here to find out more about
how to apply for a
production or exploration licence from BERR.
Licensing Rounds:
Assessment criteria
BERR ask the following
questions in their review of Traditional and Frontier licence
applications:
- Are financial
requirements of the project satisfied by the operator and/or its
partners?
- Is there evidence to
suggest that environmental policies on paper are achievable and
realistic?
- Is the operator
technically competent?
For all applications (including those for Promote Licences) a
mark scheme is used which analyses the extent of geological
evaluation of the block and operators are invited to give a
technical presentation encompassing this information together
with their aims
Licensing Rounds: Awards
BERR make a recommendation
to the Minister on which licences to award which, if accepted, are
announced in a statement to Parliament, in letters to applicants and
via a press release.
Licence Assignments
In cases where a company
wishes to divest their licensed asset to another, they must request
permission from the Secretary of State and the successful transfer
is called a Licence Assignment.
The majority of transfers on the UKCS are conducted under
MasterDeed. Click
here to visit the standard industry agreement for UKCS licence
transactions.
Companies on a
licence share their interests and liabilities through a Joint
Operating Agreement (JOA).
Click
here to visit the legal contracts (LOGIC) section of our website,
where the industry standard JOA and accompanying guidance notes can
be downloaded.
Fallow process
For information on the
Fallow Initiative, click
here.
**
Note: First Round Licences (issued in 1964) are due to expire in
September 2010 excluding acreage in production**
Operations Index
