The North Sea Transition Authority (NSTA) has advised licensees of their “obligation to collaborate effectively” following an investigation into the sale of Esso’s stake in the Elgin-Franklin platform to NEO Energy.
The regulator opened an investigation into Esso’s sale of 13 producing fields to NEO Energy last October, over concerns that the billion-dollar deal was not progressing as quickly as expected.
At the time, it warned of the potential “chilling effect” that slow transactions could have on M&A activity.
Today’s announcement affirms that both the transaction and investigation have now been completed successfully, and that no further action will be taken by the NSTA.
The deal, struck in February 2021, saw NEO take stakes in 21 assets in total, including 14 producing fields and a number of infrastructure positions, mainly operated by Shell.
In particular, the NSTA’s inquiries focused on the sale of the Elgin-Franklin fields, operated by TotalEnergies.
NEO later announced the completion of the sale around six weeks after the probe was launched.
In the wake of its investigation, the NSTA set out where improvements can be made when licensees collaborate. It also reminded North Sea buyers and sellers that collaboration is an obligation in the OGA Strategy and that failure to comply with is sanctionable under the Energy Act 2016.
In closing its findings, the NSTA observed that the parties did collaborate but found that at times “communication was lacking, roles should have been more clearly defined at the outset and not all negotiators had authority to negotiate ‘in the room’.”
It said these shortcomings may have delayed completion of the sale.
It advised firms to follow industry-developed guidance, including the Commercial Code of Practice 2016 and Negotiations Best Practice, March 2017, which provide a strong framework companies are expected to follow.
“Where there is evidence of repeated examples of poor behaviour, or a failure to collaborate, the NSTA will not hesitate to use its sanction powers,” it said in a statement.
NSTA director of regulation, Tom Wheeler, said: “Billions of pounds in new investment will be needed if the North Sea is to play its vital role in the energy transition. This case, which is by no means unique, highlights the importance of industry following its own practice guidelines, to avoid putting off new investors.
“We recognise that there is a balance to be struck between this and the need for licensees to manage counterparty risks. The NSTA is carefully examining this issue and intends to consult on this and other related matters in the coming months.”
Recommended for you
