A specialist in oil and gas law has warned that a lack of clarity over a strategy to maximise oil recovery from the North Sea could cause issues when it comes to decommissioning.
Professor John Paterson has been speaking at the Future of Energy Conference at Aberdeen University.
He says there is a lack of clarity over whether the UK government’s maximising economic recovery (MER) strategy to be carried out by the industry regulator, the Oil and Gas Authority, is a regulation or a piece of guidance.
“We’ve got the MER Strategy, is it a regulation? They say it’s not. If it’s not, is it guidance? They say it’s more than that. What is it? We don’t know. It’s a license, it’s an authorisation, but it’s also a contract and it’s also about regulatory.
“If any of this ever comes before a judge, some of them might say they will find a way through. Others are going to say ‘First of all, tell me what all these documents are. Is it a contract, an authorisation or a regulation? Is that a regulation, or a guidance for something else?’
“Which regime trumps the other? I don’t know, I’m just a professor of law.”
The MER UK strategy came into force in March 2016, following the Wood Review.
The Oil and Gas Authority’s website says that the strategy’s central obligation is binding on relevant persons and the OGA.
It states: “Relevant persons must take the steps necessary to secure that the maximum value of economically recoverable petroleum is recovered from the strata beneath UK waters.”
Professor Paterson, from the university’s law department, stated that the strategy could cause issues with operators looking to abandon an area, while the regulator aims to boost recovery.
“We’ve got the Oil and Gas Authority, which of course is implementing the MER Strategy. The strategy by which we are maximising economic recovery.
“The other thing we’ve realised as we begin decommissioning is that you don’t suddenly stop and take everything away, you stop some bits, you keep going with others, and you’re still trying to develop others.
“We get ourselves into a bind where Operator A says ‘Right, I’m finished. Cease production, here’s my abandonment plan, let’s go’. All of a sudden they’re talking to the OGA, who say ‘yeah, you’re looking at that, but I’m looking at a bigger area, and I need your infrastructure in place to allow these developments’.
“The OGA will say ‘I have an obligation to implement the MER strategy and that may require you to hold this in place’.
“So who is paying? Don’t know”.
A spokeswoman for the OGA said: “The MER UK Strategy has been in place for two years with the Infrastructure Act 2015, Petroleum Act 1998 and Energy Act 2011 & 2016, providing the legislative basis for the OGA to exercise its powers.”
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