Guide to insolvency in the UK oil and gas industry
Produced in partnership with Emma Riddle of partner at CMS

The following Restructuring & Insolvency practice note produced in partnership with Emma Riddle of partner at CMS provides comprehensive and up to date legal information covering:

  • Guide to insolvency in the UK oil and gas industry
  • Introduction to common participants in the market
  • Legal basis for exploration and production
  • Exploration and Production Licence ('E&P Licence')
  • Joint Operating Agreements and Unitisation
  • Restructuring issues
  • Jurisdictional issues
  • Insolvency analysis
  • Options available to officeholders

Guide to insolvency in the UK oil and gas industry

Introduction to common participants in the market

The oil and gas industry is a significant contributor to the UK economy:

  1. it supports around 152,000 jobs (both directly and indirectly)

  2. the industry contributed 0.8% of GDP in the second quarter of 2015 (down from a high of 2.5% in the second quarter of 2008)

  3. in 2016/2017, government revenues from oil and gas production were £1.2bn

  4. the UK is the second largest producer of oil in Europe and the third largest producer of gas

Historically, the industry has been buoyant, and insolvency practitioners have not had much involvement. In 2010, there were just four insolvencies in the sector. However, in 2015 oil prices hit an all-time low which saw insolvencies in the sector rise to 28 for that year. As a result of its maturity, the UK continental shelf is among the more expensive places in the world to produce oil: prior to the last downturn in oil prices in 2015/2016 the cost of producing a barrel of oil in the UK cost $US40 compared to less than $US5 in Kuwait. This cost has somewhat reduced following the 2015/2016 downturn with the average operating cost now being around $US15 per barrel of oil in the UK.

Since the last downturn in oil prices in 2015/2016 most companies have restructured or

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