ExxonMobil's sale to NEO of interests in 13 producing fields – including the Elgin Franklin fields, operated by TotalEnergies, took longer than expected to complete, prompting an investigation by the regulator in the UK - Image for illustration - Elgin PUQ platform - Credit: Harbour EnergyUK offshore energy regulator North Sea Transition Authority (NSTA), formerly known as Oil and Gas Authority (OGA), urged the UK North Sea oil and gas license holders to collaborate effectively and ensure transactions are completed promptly, to support investment in the UK Continental Shelf (UKCS), or else, they may be sanctioned.
This follows the government body's investigation into ExxonMobil's $1 billion sale to NEO of interests in 13 producing fields – including the Elgin Franklin fields, operated by TotalEnergies. Exxon and NEO first announced the deal in February 2021. However, after months of the deal not reaching completion, OGA launched an investigation in October 2021. The transaction was completed in December 2021.
In a statement on Thursday, NSTA said that following its investigation into Exxon's assets sale to NEO – the regulator has set out where improvements can be made when licensees collaborate.
"Collaboration is an obligation in the OGA Strategy and failure to comply with The Strategy is sanctionable under the Energy Act 2016. The transaction has now successfully completed and no further action will be taken by the NSTA, following the investigation," NSTA said.
"The NSTA launched the investigation amid concerns that negotiations were progressing too slowly and the possible chilling effect this could have on investment. The investigation focused on collaboration between vendor, purchaser and operator," NSTA reminded.
Communications lacking
"In closing the investigation, the NSTA observed that the parties did collaborate, however, 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”. These shortcomings may have delayed the transaction," NSTA said.
According to NSTA, industry-developed guidance, which includes the Commercial Code of Practice 2016 and Negotiations Best Practice, March 2017, emphasises the significance of:
"This industry-developed guidance provides a strong framework, which the industry is expected to follow. Where there is evidence of repeated examples of poor behavior, or a failure to collaborate, the NSTA will not hesitate to use its sanction powers," NSTA warned.
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 recognize 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.”
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