OGA Opens Investigation into North Sea Sale
The UK Oil and Gas Authority (OGA) has announced that it has opened an investigation into the proposed sale by Esso Exploration & Production Ltd (EEPUK) of 13 producing fields, specifically Elgin Franklin, to NEO.
The OGA outlined that the investigation was taking place amid concerns it is not progressing as quickly as expected. The investigation will examine the engagement between the parties since EEPUK and NEO Energy announced the proposed deal in February, the OGA revealed. This includes serving the parties with information notices which ask them to account for their actions since the transaction was proposed.
In its latest announcement, the OGA highlighted that the consent of joint venture partners is required in order to effect the transfer. There are eight joint venture partners in Elgin Franklin alone, including Total and EEPUK. The OGA noted that collaboration is an obligation in the OGA Strategy and failure to comply with that obligation is sanctionable under the Energy Act 2016.
The opening of an investigation does not prevent the proposed deal from progressing, according to the OGA, which said everyone with interests connected to the transaction must still meet their obligations under the OGA Strategy and industry voluntary codes of practice.
Back in February, ExxonMobil announced that it had signed an agreement with HitecVision, through its wholly owned portfolio company NEO Energy, for the sale of most of ExxonMobil’s non-operated upstream assets in the United Kingdom central and northern North Sea. In a company statement at the time, the sale was said to have a price of more than $1 billion and additional upside of approximately $300 million in contingent payments based on a potential for increase in commodity prices.
The agreement includes ownership interests in 14 producing fields operated primarily by Shell, including Penguins, Starling, Fram, the Gannet Cluster and Shearwater; the Elgin Franklin fields operated by Total; and interests in the associated infrastructure, ExxonMobil highlighted at the time. In its February statement, ExxonMobil noted that the transaction was expected to close by the middle of 2021, subject to regulatory and third-party approvals.
In a separate statement in February, NEO Energy outlined that the deal put NEO among the top five oil and gas companies in the UK. In July this year, NEO completed its acquisition of the independent oil and gas company Zennor Petroleum Limited, after the deal was announced in March, and in August 2020, NEO completed an acquisition of UK North Sea assets from Total.
In October last year, the OGA conducted a Thematic Review 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.
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