UK Oil And Gas Licensing: Change Of Control Of Licensee - New Information Requirements

Summary

Transfers of interests in oil and gas production licences can be

made in two ways; either by an "asset sale": the transfer

of the licence(s) and associated agreements themselves; or by a

"share sale": the sale of the shares in the company

holding the licence(s) (or that company's parent). Licensees

looking to transfer their licence interests through a share sale

should consider the recently increased information requirements

relating to the application for a letter of comfort from the

Department of Energy and Climate Change ("DECC").

Background

In the UK the Secretary of State is empowered to grant licences

for the exploration and production of petroleum. The detailed terms

of any licence lie within the model clauses which are traditionally

in the form of a statutory instrument and are incorporated by

reference. However, since the 20th offshore licensing round in

2002, the applicable model clauses have been set out in full within

the licence itself.

The consent of the Secretary of State must be sought before

transferring any interest in a licence. Consent is not necessary to

transfer the shares in a licensee. However, the government has the

power under the model clauses to revoke the licence if a

"change of control" of a licensee takes place which is

not, at the request of the government, unwound. "Change of

control" is widely defined and captures both direct and

indirect ownership. The purpose of the right to revoke is to

prevent UK oil and gas licences being ultimately controlled by

persons undesirable to the government. It is therefore common in

oil and gas share transactions for parties envisaging a share

transfer to apply to the government for assurance that upon the

change in share ownership it will not exercise its powers to revoke

the licence.

Traditionally where there is a change of control of the licence,

the licensee has provided details of the prospective transfer to

the government, including corporate information about the company

acquiring control. The government reviews these details and then

issues a letter of comfort if the transfer is considered

acceptable.

New Information Requirements

DECC has recently increased the information requirement in

relation to the details required in support of the application and

now the following must be provided:

the new corporate parent's name, place of incorporation and

company registration number

post-change of control pro-forma balance sheet for the licensee

and a consolidated...