Decommissioning—decommissioning security agreement

Decommissioning security agreements

Oil and gas companies are expected to return the seabed to its original state (subject to certain exceptions) by permanently removing installations and/or infrastructure from the seabed and securing wells. As decommissioning occurs when the asset no longer produces revenues, the companies primarily responsible for decommissioning provide funds in a trust in advance so that those funds are available when decommissioning occurs, whether or not the company providing those funds still exists at the time. Such trusts are created by a decommissioning security agreement (DSA), a contract between two (or more) parties that obliges a party to create a trust in favour of another party (or parties) for the future cost of decommissioning. The trust will either hold cash or security and, usually, will be administered by an independent trustee.

For more information on Decommissioning, see Practice Notes:

1. •

   Decommissioning—International Law and UK Government Policy

2. •

   Decommissioning—legislative background

3. •

   Decommissioning—planning for decommissioning

4. •

   Decommissioning—types of decommissioning contracts

Types of DSA