Repsol North Sea Limited fined ￡350,000 for unreasonable practice and halting NEO’s production
The North Sea Transition Authority (NSTA) has today (25 November) published its highest-ever fine of ￡350,000 on Repsol North Sea Limited (RNS) for behaviour that led to a shut-in at the Flyndre field and hampered economic recovery of petroleum.?
The Fulmar facility in the Central North Sea, operated by RNS, ceased production in 2018, but continued to be used for the transportation of oil and gas by the Flyndre, Auk and Clyde fields. Auk and Clyde were owned and operated by Repsol Resources UK Ltd. Flyndre was owned and operated by TotalEnergies, before being taken over by NEO from July 2020.??
Before NEO took control of Flyndre, RNS told TotalEnergies that it intended to increase transportation charges through Fulmar and, when TotalEnergies questioned the hike, RNS issued a Termination Notice saying that the agreement would end on 6 August.??
RNS refused TotalEnergies’ request for further talks and the provision of information and on 6 August, the transportation agreement ended and, as a result the Fulmar facility – which was undergoing maintenance - did not reopen on 8 August as planned.?
Flyndre remained shut-in until 13 August when a temporary agreement was reached which allowed transport of oil and gas from Flyndre to resume.?
Long-term agreement was never reached, and the situation was only resolved when RNS took ownership of the Flyndre field in November 2021.?
The NSTA’s investigation – which was undertaken under the then MER UK Strategy - found that RNS failed to take the steps necessary to secure the maximum value of economically recoverable petroleum as required by the MER UK Strategy.?
It also found that RNS did not operate Fulmar in a way that facilitated the maximum value of economically recoverable petroleum from the region in which it was situated and failed to ensure that it was used by or for the benefit of others within the region.?
RNS applied undue pressure on TotalEnergies and NEO in renegotiating agreements which caused Flyndre to be shut-in for five days. They also set an unrealistic timetable, failed to provide timely information, did not justify the proposed rise in charges, and used the Termination Notice to pressurise negotiations and gain a commercial advantage.?
The company’s failure to collaborate and to demonstrate the Required Actions and Behaviours under the MER UK Strategy could have a negative impact on investment in the North Sea so it has, therefore, been sanctioned accordingly.?
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Jane de Lozey, NSTA Director of Regulation, said:?
“The North Sea needs to play a key role in progressing the energy transition and energy security in the UK and, in order to do that, operators must follow the Strategy and collaborate and cooperate with each other.?
“The NSTA will continue to work with industry to help operators meet the required standards of behaviour; and this action shows that we will not hesitate to take action when an operator falls short.”?
Last month, the NSTA issued guidance for the conduct of North Sea transactions calling for greater collaborative working between companies to help minimise transaction delays which:?
?Increase costs??
Prolong uncertainty?
Hold up operational and strategic decisions?
Damage trust and working relationships among companies working in the Basin?
Erect barriers to investment.?
Separately, the NSTA has also fined ONE-Dyas ￡75,000 for failing to comply with a condition of its offshore licence.?
The company plugged and abandoned a well only sending an application for consent to do so on 9 June 2023 – two days after the work had been completed.?
It is crucial that the NSTA is asked for consent before work takes place to ensure that the proposed work meets the necessary standards and is able to consider the potential for alternative uses, such as carbon storage.?
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Managing Director at TotalEnergies
2 个月Speaking in a personal capacity I find it interesting that a branch of the UK government has sanctioned a UK operator for - amongst other things - erecting barriers to investment given current tax policies.
Retired. Oil and Gas professional. Mechanical biased Commissioning & Maintenance
3 个月What is ￡350k to a company the size of Repsol?
Upstream Economics / Strategy / Upstream Commercial / Hub Analysis / Training / Mentoring
3 个月Hmmm ... given the realities of, and, often, the genuine need for, late life host : satellite tariff renegotiations [because terms in legacy commercial arrangements often don't "work" for late life situations] , and the "interesting" behaviours that can be exhibited by ALL parties when a host indicates a requirement to revise transportation terms and conditions, often for quite legitimate reasons, this release by the NSTA may not be providing enough "colour" as to why the regulator has acted in this manner ... perhaps expanding on its rationale might be an appropriate agenda item for the Upstream Commercial Manager's Forum? As a former Commercial Manager, often involved in such late life tariff renegotiation discussions [which are not normally straightforward, often challenging, and often protracted, and, usually, never easy] it would be helpful, in the words of Stephen Covey, "to seek first to understand" ... just a thought ...
Reserves Auditor: CO2 Storage: Geothermal: Infrastructure Reuse
3 个月The North Sea Transition Authority can fine companies that breach its rules up to ￡1 million. This fine may be its highest imposed yet, but is still 3 times lower than it could have been. The regulator remains reluctant to send a tough message to wayward operators.