OPEN PERMISSION (OPERATING AGREEMENTS)
Open Permission granted by the Secretary of State on 1) The Secretary of State, in exercise of powers conferred under the Petroleum Act 1998 and subject to paragraphs 3, 4 and 5 below, approves the creation, novation or amendment of any Operating Agreement, with respect to the entitlement of the parties to it, to: a) the benefit of rights (not being obligations imposed on the Secretary of State by the Licence) granted by a Licence; b) any petroleum won and saved from the area to which the said Licence applies; c) any proceeds of the sale of such petroleum. 2) This Open Permission shall come into effect on 28 April 2003. Conditions 3) Where the Relevant Action constitutes the creation of a new Operating Agreement, and the Licence covers acreage in the territorial sea or on the United Kingdom Continental Shelf the approval given by paragraph 1 shall only have effect if: a) where the Licence or, as the case may be any of the Licences, came into force before 1 July 2002, and the Operating Agreement contains any Preemption Arrangements, the Operating Agreement complies in relevant respects with the „Streamlined Transfer and Pre-Emption Arrangements for the United Kingdom Oil & Gas Industry – Industry Master Deed‟ dated 28 April 2003 as regards Preemption Arrangements; b) where the Licence, or as the case may be all of the Licences, came into force after 30 June 2002, the Operating Agreement does not contain any Pre-Emption Arrangements; and c) it is a condition of the Operating Agreement that the Operator must register its appointment as such with the Offshore Pollution Liability Association Ltd before any drilling operations may commence. 4) Where the Relevant Action constitutes a novation that is necessary for the implementation of a Licence Assignment, the Approval given by paragraph 1 shall only have effect if the Secretary of State has approved the Licence Assignment. 5) Where the Relevant Action is not necessary in order to give effect to the implementation of a Licence Assignment, the Approval given by paragraph 1 shall have effect only where: a) the Licensee undertakes to notify the Secretary of State, within two weeks of the said Relevant Action and in a manner from time to time approved by the Secretary of State, of: i) the interest held by each Party in each piece of acreage subject to that Agreement, and the geographical coordinates of each of those pieces of acreage; ii) the full name and registered number of every Party; iii) the date of the Relevant Action; b) the Operating Agreement does not assign or re-assign any rights granted by the Licence to any person who is not a party to the Licence; c) the Relevant Action does not give any Party a Controlling Interest in any acreage to which the Operating Agreement relates (or is intended in future to relate) where that Party does not already have a Controlling Interest; and where two or more Connected companies are each a Party, for the purposes of this subparagraph they shall be treated as a single Party. Exceptions 6) The Approval in paragraph 1 above is given solely for the purposes of the relevant model clauses made pursuant to the Petroleum Act 1998 and attached to the Licences. 7) For the avoidance of doubt nothing in this Open Permission shall be deemed to convey any permission, approval or permission for the purposes of: a) any function of organising or supervising all or any of the operations of searching or boring for or getting petroleum;
b) any Licence Assignment; c) Part IV of the Petroleum Act 1998. Definitions 8) For the purpose of this Open Permission: a) “the Act” means the Petroleum Act 1998; b) “Connected”, as regards the relationship of one company to another, shall be construed in accordance with section 839 of the Income and Corporation Taxes Act 1988; c) “Controlling Interest” means, as regards a Party, that that Party has the power to secure that, subject to the constraints of law and equity, the matters that are subject to the Operating Agreement are conducted in accordance with his wishes; d) “Licence” means any licence granted by the Secretary of State, pursuant to section 3 of the Act or any licence having effect as if so granted, some or all of the rights granted by and obligations imposed by which are modified as among the persons constituting the Licensee by the Operating Agreement, and as the case may be shall include several such Licences; e) “Licence Assignment” means a document made between the Secretary of State and one or more of the parties to the Licence in respect of the transfer of rights and obligations under a Licence; f) “Operating Agreement” means an agreement made in respect of a Licence with respect to the entitlement of any of the parties to the Licence to: i) the benefit of any right granted by the Licence; or ii) any Petroleum won and saved from the licensed area; or iii) any proceeds of sale of such Petroleum, except for: iv) any agreement for the sale of such Petroleum under which the price is payable after the Petroleum is won and saved; and v) any agreement in so far as it provides that, after any Petroleum has been won and saved from the licensed area, it shall be exchanged for other Petroleum. g) “Operator” means the party authorised under the terms of the Operating Agreement to exercise any function of organising or supervising all or any of the operations of boring for or getting Petroleum; h) “Party” means a party to the Operating Agreement; i) “Pre-emption Arrangements” means those provisions (if any) set out in any Operating Agreement which provide for rights and obligations of the Participants in relation to the acquisition by one or more of such Participants from another Participant of all or part of its interest under such Operating Agreement in circumstances of (and precedence over) an intended transfer of such interest and for the avoidance of doubt such expression shall exclude provisions concerning the entry into discussions or other provisions which (even if of a similar nature to such arrangements) do not result in binding rights or obligations in respect of any such intended transfer; and j) “Relevant Action”, in relation to an Operating Agreement, means its creation, novation or amendment. 9) Subject to paragraph (8), words and expressions used in this Open Permission have the same meaning as in the Act or the Licence. Revocation 10) The Open Permission granted by the Secretary of State on 18 December 2002 is hereby revoked but not so as to affect any Approval given by it before the date mentioned in paragraph (2) hereof.
Signed by Date:
, an official of the Department of Trade & Industry.
Explanatory Note This Open Permission is granted under the Petroleum Act 1998, and in particular the Model Clauses of each Licence granted under that Act. It permits the several companies that together constitute the Licensee to novate an Operating Agreement (including both Joint and Unit Operating Agreements) in the course of implementing a Licence Assignment that has already been approved by the Secretary of State. In addition, the Open Permission permits the amendment or creation of an Operating Agreement in other circumstances, provided additionally that the Operating Agreement does not create a new controlling interest in any acreage, nor assign Licence rights to anyone outside the Licence. In these cases there is also a requirement to notify DTI of certain details of the transaction. However, the creation of new Operating Agreements under Seaward Licences is only permitted if: the Operating Agreement complies with the format set out at Schedule 3 to the „Streamlined Transfer and Pre-Emption Arrangements for the United Kingdom Oil & Gas Industry – Industry Master Deed‟ as regards Pre-Emption Arrangements (if the Licence was issued before the 20th Offshore Licensing Round); or contains no preemption clauses at all (if the Licence was issued later than the 20th Offshore Licensing Round) – this is in accordance with Recommendation 6.2 of the Final Report of PILOT‟s Progressing Partnerships Working Group; and the Operating Agreement obliges the operator to register its appointment with the Offshore Pollution Liability Association Ltd.
Note that each of the Conditions (paragraphs 3 to 5) must be met separately. In particular, note that the creation of a new Operating Agreement in seaward areas must satisfy paragraph 5 as well as paragraph 3. Specifically, this Open Permission concerns the entitlement of the parties to an Operating Agreement to the benefit of Licence rights, to petroleum won and saved and to the proceeds of sale of petroleum (to the extent required by the Model Clauses). However, it does not convey approval of anything else, including anything else controlled by the Model Clauses. For example, it does not convey any consent to or approval of the appointment of an operator, to any licence assignments, nor to anything to do with wells; nor does it have any bearing on the decommissioning provisions of the Petroleum Act. Nor does it have any effect on any “Licensee rights” which are actually obligations imposed on the Secretary of State: for instance, the Secretary of State‟s obligations as regards the confidentiality of data. The text in the Schedule is taken from the „Streamlined Transfer and Pre-Emption Arrangements for the United Kingdom Oil & Gas Industry – Industry Master Deed‟ created in 2002 by PILOT‟s Progressing Partnerships Working Group. Defined terms in the Schedule carry the meanings used in that Master Deed.