There are a significant number of production sharing agreements worldwide that are due to expire over the next few years. These agreements are all going to give rise to questions about responsibility for assets at handover, including potentially enormous claims for restoration, abandonment and decommissioning costs, with obvious scope for disputes between the states and the oil and gas companies as to who foots the bill and in what amount.
Many of these disputes are resolved by negotiation or confidential arbitration. Whilst there have been few reported legal disputes relating to end of contract and decommissioning issues, the topicality and increasing importance of this issue to the oil and gas sector – especially in the context of transition away from high carbon producing energy sources – means that this is unlikely to remain the case for much longer, with some estimates indicating that some 470 installations in the North Sea alone need to be decommissioned over the next 30 to 40 years.
This is a global issue, and will also inevitably give rise to disputes as to how best to dispose of structures which are in some cases approximately 50 years old and deal with the vast liabilities that will need to be apportioned between operators past and present, and the state in question.
In this Quadrant Chambers webinar, our panel chaired by Caroline Pounds, considered the following relevant issues:
- A review of recent decisions on the construction of energy contracts – Ben Gardner
- A consideration of common end of life provisions in PSCs and JOAs with a view to identify potential problems and pitfalls – Chris Smith KC
- Outlining the regulatory framework surrounding decommissioning and disposal of end-of-life assets - James M Turner KC