- Company failed to ensure their economic recovery obligations
- Imposed unreasonable time limit on negotiations
- Shut-in Flyndre and stopped production for five days
The North Sea Transition Authority (NSTA) has today (25 November) published its highest-ever fine of £350,000 on Repsol North Sea Limited (RNS) for behaviour that led to a shut-in at the Flyndre field and hampered economic recovery of petroleum.
The Fulmar facility in the Central North Sea, operated by RNS, ceased production in 2018, but continued to be used for the transportation of oil and gas by the Flyndre, Auk and Clyde fields. Auk and Clyde were owned and operated by Repsol Resources UK Ltd. Flyndre was owned and operated by TotalEnergies, before being taken over by NEO from July 2020.
Before NEO took control of Flyndre, RNS told TotalEnergies that it intended to increase transportation charges through Fulmar and, when TotalEnergies questioned the hike, RNS issued a Termination Notice saying that the agreement would end on 6 August.
RNS refused TotalEnergies’ request for further talks and the provision of information and on 6 August, the transportation agreement ended and, as a result the Fulmar facility – which was undergoing maintenance - did not reopen on 8 August as planned.
Flyndre remained shut-in until 13 August when a temporary agreement was reached which allowed transport of oil and gas from Flyndre to resume.
Long-term agreement was never reached, and the situation was only resolved when RNS took ownership of the Flyndre field in November 2021.
The NSTA’s investigation – which was undertaken under the then MER UK Strategy - found that RNS failed to take the steps necessary to secure the maximum value of economically recoverable petroleum as required by the MER UK Strategy.
It also found that RNS did not operate Fulmar in a way that facilitated the maximum value of economically recoverable petroleum from the region in which it was situated and failed to ensure that it was used by or for the benefit of others within the region.
RNS applied undue pressure on TotalEnergies and NEO in renegotiating agreements which caused Flyndre to be shut-in for five days. They also set an unrealistic timetable, failed to provide timely information, did not justify the proposed rise in charges, and used the Termination Notice to pressurise negotiations and gain a commercial advantage.
The company’s failure to collaborate and to demonstrate the Required Actions and Behaviours under the MER UK Strategy could have a negative impact on investment in the North Sea so it has, therefore, been sanctioned accordingly.
Jane de Lozey, NSTA Director of Regulation, said:
'The North Sea needs to play a key role in progressing the energy transition and energy security in the UK and, in order to do that, operators must follow the Strategy and collaborate and cooperate with each other.
''The NSTA will continue to work with industry to help operators meet the required standards of behaviour; and this action shows that we will not hesitate to take action when an operator falls short.'
Last month, the NSTA issued guidance for the conduct of North Sea transactions calling for greater collaborative working between companies to help minimise transaction delays which:
- Increase costs
- Prolong uncertainty
- Hold up operational and strategic decisions
- Damage trust and working relationships among companies working in the Basin
- Erect barriers to investment.
Separately, the NSTA has also fined ONE-Dyas £75,000 for failing to comply with a condition of its offshore licence.
The company plugged and abandoned a well only sending an application for consent to do so on 9 June 2023 – two days after the work had been completed.
It is crucial that the NSTA is asked for consent before work takes place to ensure that the proposed work meets the necessary standards and is able to consider the potential for alternative uses, such as carbon storage.
Source: NSTA
