|
The Petroleum Act 1998 vests all rights to the nation's petroleum resources in the Crown. But the Secretary of State (for Trade and Industry - i.e. the Government) can grant licences that confer exclusive rights to "search and bore for and get" petroleum. Each of these licences confers such rights over a limited area and for a limited period.
Most Licences follow a standard format, but DTI is flexible in this and ready to consider adapting new licences to suit special scenarios.
The Secretary of State has discretion in the granting of licences, which he exercises to ensure maximum exploitation of this valuable national resource, but there are other considerations that he must also take into account - protection of the environment and the interests of other users of the sea, for instance.
Licences can be held by a single company or by several working together, but in legal terms there is only ever a single Licensee, however many companies it may include. All the companies on a Licence share joint and several liability for operations conducted under it.
Each Licence actually takes the form of a Deed, which binds the Licensee to obey the licence conditions regardless of whether or not s/he is using the Licence at any given moment.
DTI expects companies to work their licences. In recent years, the amount of acreage that has been left untouched, and those exclusive rights unexploited, has become a matter of concern and has led PILOT (formerly the Oil & Gas Industry Task Force) to instigate the Fallow Initiative.
History
The UK's onshore petroleum licensing regime was set up under the impetus of the fuel demands of the First World War, although the first licences weren't issued until 1935.
Offshore licensing began with the North Sea boom of the sixties. The Ministry of Power issued the first offshore licence, P001, in 1964, and its successor the Department of Trade & Industry issued the one-thousandth licence in 1999.
Geography
DTI's Licensing system covers oil and gas within Great Britain, its territorial sea and on the UK Continental Shelf (UKCS).
Northern Ireland's offshore waters are subject to the same licensing system as the rest of the United Kingdom Continental Shelf. Northern Ireland receives a biennial payment from overall royalty and rental payments calculated in proportion to Northern Ireland's population. Northern Ireland issues its own Licences to cover its onshore area, independently of DTI (contact: the Department of Enterprise, Trade and Investment's Energy Division; tel: 028 9052 9900).
The Isle of Man issues Licences for its own onshore area and territorial waters (contact: the Economic Development Group of the Isle of Man's Department of Trade & Industry; tel: 01624 687175).
The designated area of the UKCS has been refined over the years by a series of designations under the Continental Shelf Act 1964 following the conclusion of boundary agreements with neighbouring states. The most recent is the Scottish Adjacent Waters Boundaries Order 1999 (No. 1126) implementing an agreement reached with the Faeroe Islands.
Coordinate systems
Guidance notes on Offshore co-ordinates
Guidance notes on Onshore co-ordinates
Rentals
Each licence carries an annual charge, called a rental. Rentals fall due each year on the licence anniversary (except that for pre-20th Round Seaward Production Licences in their Initial Terms, rentals only fell due in Year 1). They are charged at an escalating rate on each square kilometre that the Licence covers at that date.
Rentals have two purposes: they encourage Licensees to surrender acreage they don't want to exploit, so as to free it up for others who do; and they concentrate their minds on the acreage they actually decide to keep.
Terms (periods)
Seaward Production Licences and Petroleum Exploration and Development Licences are valid for a sequence of periods, called Terms. These Terms are designed to follow the typical lifecycle of a field: exploration, appraisal, production. Each Licence expires automatically at the end of each Term, unless the Licensee has made enough progress to earn the chance to move into the next Term.
The Initial Term is usually an exploration period. For Seaward Production Licences it's normally set at four years, although it can be longer for 'frontier' Licences. For Petroleum Exploration and Development Licences it's set at six years. The Initial Term carries a Work Programme of exploration activity that DTI and the Licensee will have agreed as part of the application process. The Licence expires at the end of the Initial Term unless the Licensee has completed the Work Programme by then. At that time the Licensee must also relinquish a fixed amount of acreage (usually 50%), which is another attempt to ensure that the Licensee has explored the whole acreage by then.
The Second Term is intended for appraisal and development. It lasts for four years for Seaward Production Licences and five for Petroleum Exploration and Development Licences. The Licence expires at the end of the Second Term unless the Secretary of State has approved a Development Plan by then.
The Third Term is intended for production. It lasts for 18 years for Seaward Production Licences and 20 for Petroleum Exploration and Development Licences. The Secretary of State has the discretion to extend it if production is continuing, but DTI reserves the right to reconsider the provisions of the Licence before doing so, especially the acreage and rentals.
The qualifying criteria to continue into the next Term are of course minima. DTI sets no maximum rate of progress, and all other things being equal would be more than happy to see a Licensee progress through exploration and appraisal to production before the end of the Initial Term, if it were possible. It would not shorten the Licence's overall life.
Relinquishments/Surrenders
Licensees are entitled to 'determine' (i.e. surrender) a Licence, or part of the acreage covered by it, at any time (unless the licence is still in its Initial Term and the Work Programme has not been completed). In fact, DTI positively encourages the surrender of acreage unless the Licensee actually intends to work it, and a minimum relinquishment of acreage at the end of the Initial Term is actually a condition of most Licences.
Partial surrenders are subject to restrictions on the complexity of the area relinquished, because we do not wish to create unlicensed areas so irregular in shape that they would be unattractive to other companies.
Multiblock Licences
Many licences cover more than one block. The term "multiblock licences" has come to refer to offshore licences where the blocks have widely-divergent licence groups of companies. The reason is generally that the blocks are scattered geographically.
We recognise the problems that can arise and we have undertaken not to issue any more licences covering scattered areas. In principle we would also be happy to split existing multiblock licences, and are currently working with industry to work out a way to do so.
Onshore Licences and landowners
The Secretary of State issues landward production licences (Petroleum Exploration and Development Licences) under powers granted by the Petroleum Act 1998. They confer the right to search for, bore for and get hydrocarbons under that legislation, but they do not confer any exemption from other legal/regulatory requirements, such as any need to gain access rights from landowners, health and safety regulations, or planning permission from relevant local authorities.
In particular, nothing in Part I of the Act confers, or enables the Secretary of State to confer, any right to enter on or interfere with land (see section 9(2) of the Act). However, it should also be noted that section 7(1) of the Act applies the Mines (Working Facilities and Support) Act 1966 in England, Wales and Scotland for the purpose of enabling a Licensee to acquire such ancillary rights as may be required for the exercise of the rights granted by the Licence.
To see whether any particular site is covered by a Licence (e.g. during house conveyancing), consult the relevant map elsewhere on this site. Anyone requiring further advice should email us at approvals@dti.gsi.gov.uk, or write to Licensing & Consents Unit (Oil & Gas Licensing Administration), Bay 2130, Dept of Trade & Industry, 1 Victoria Street, London SW1H 0ET, including the Ordnance Survey coordinates of the site in question (note that we do not record or use postal addresses or postcodes).
|
