Financial Liability for Decommissioning in the UKCS: the Comparative Effects of LOCs, Surety Bonds, and Trust Funds

The subject of the decommissioning of oil and gas fields in the UKCS has many facets. One of the main economic ones relates to the financial liability for the activity. In the UK there is clear joint and several liability among co-licensees. Further, the Government can request, and in some circumstances require, a licensee to provide financial security for the prospective decommissioning costs. Asset transactions involving mature fields have become increasingly common with some companies specialising in maximising economic recovery from mature fields. In such cases while the decommissioning obligation may be transferred from the initial licensee to the new one the Government may insist that liability stays with the original one if there are doubts about the financial competence of the new licensee to fulfil the work obligation