Decommissioning—types of decommissioning contracts

The following Energy practice note provides comprehensive and up to date legal information covering:

  • Decommissioning—types of decommissioning contracts
  • Relevant licensee contracts
  • Operator and government arrangements—decommissioning relief deed
  • Operator and contractor arrangements—well decommissioning
  • Operator and contractor arrangements—infrastructure decommissioning
  • Logic general conditions for decommissioning

Decommissioning—types of decommissioning contracts

Oil and gas decommissioning is usually undertaken by the designated operator of the licence (for an on behalf of its coventurers), therefore it is important to make sure that all agreements are in place for all relationships.

Relevant licensee contracts

Agreement typePartiesPurposeWhen to be in place
Joint Operating Agreement (JOA)LicenseesUsed to agree the process for decommissioning and the accounting of expenditureWhen the licence is entered into
Decommissioning Security Agreement (DSA)LicenseesTo provide for future decommissioning costsIdeally should be agreed prior to field development but, in practice, this usually happens later
Trust DeedEach licensee, the Operator and the Law Debenture Trust CompanyRegulates the funds that have been put in place for the cost of decommissioningDetermined by the DSA

For more information on JOAs and DSAs, see Practice Notes:

  1. The purpose and the principles of the joint operating agreement

  2. Joint operating agreements—operator and non-operating party perspectives

  3. Decommissioning—decommissioning security agreement

Operator and government arrangements—decommissioning relief deed

The Decommissioning Relief Deed/(DRD) is a contract between the UK government and a 'Qualifying Company' which operates in the oil and gas exploration and production market in the UK or on the UK Continental Shelf (UKCS).

It aims to provide certainty on the tax relief a Qualifying Company will receive at the time of offshore oil and gas decommissioning

Popular documents