UK regulator urges operators to close deals promptly
The UK's North Sea Transition Authority (NSTA) has urged North Sea operators to close their transactions quickly to avoid deterring investors, after undertaking an investigation in light of ExxonMobil's delayed sale of assets to NEO, finally completed last December.
It took 10 months for Exxon and NEO to wrap up the transaction, which involved Exxon's interests in 13 producing fields on the UK shelf, including the TotalEnergies-operated Elgin Franklin project. NSTA launched its probe over concerns that negotiations were progressing too slowly, "and the possible chilling effect this could have on investment." Its investigation focused on the vendor, purchaser and operators involved.
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"Collaboration is an obligation in the OGA Strategy and failure to comply with the strategy is sanctionable under the Energy Act 2016," NSTA said on April 14. As the Exxon-NEO deal was completed, no further action will be taken, NSTA said, but it noted that while the two companies did collaborate, "at times communication was lacking, roles should have been more clearly defined at the outset and not all negotiators had authority in negotiate 'in the room.'"
"These shortcomings may have delayed the transaction," the regulator 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, NSTA director of regulation Tom Wheeler said. “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.”