The Oil Taxation Act 1975 states that all fields are to be “determined” by a boundary drawn around them. A proposed determination of a field must be made before the OGA can approve a Field Development Plan (FDP).
The Oil Taxation Act 1975 introduced and made provision for Petroleum Revenue Tax (PRT) to be levied on all oil and gas fields. Schedule 1 to the Act states that all fields are to be “determined” by a boundary drawn around them. Following debate around the Oil Taxation Bill, it became clear the boundary was to be drawn in accordance with geological criteria alone so the field could be defined as a single geological petroleum structure.
A field determination is therefore a boundary that encompasses the maximum extent of the field. This is taken as the maximum extent of all the hydrocarbons present, whether moveable or not, and regardless of whether the entire accumulation is in phase and/or pressure communication.
It follows that for a hydrocarbon accumulation to be determined as a field it must be physically separated from any other accumulations that might be present nearby. This separation may be by means of a structural low below the lowest known hydrocarbon ("blue water") or by non-permeable rock eg, a shale-out of the reservoir. Both structural and stratigraphic traps can therefore be determined as fields. Field Determinations may have a top and/or a base, or overlie or abut one another. A field determination may only cover an area that is part of a licensed area.
The 1993 Finance Act abolished PRT for new fields and created two categories of field:
- old fields: those given development consent before 16 March 1993 – are subject to PRT
- new fields: not subject to PRT, but receive determinations and re-determinations as appropriate so all fields are defined in the same way. Determinations are still required for corporation tax purposes and are utilised by the OGA with respect to the possible requirement for unitisation.
Field Determination process
A proposed determination of a field must be made before the OGA can consent to a field development. The process for determination involves the OGA issuing a proposal (for the boundary) to all licensees with an interest in the licenced blocks in which the field is situated and licensees in the adjacent blocks, so all parties can ensure their interests in the field will be recognised. The boundary is defined offshore by parallels of latitude and meridians joining the co-ordinate points and onshore by grid lines of the UK National Grid. To assist the OGA in preparing a proposed determination the field operator will be asked to provide a top structure map at 1:25,000 scale showing actual and proposed well locations, fluid contacts, licence boundaries, and the proposed Development Area and Unit Area (if applicable – see below).
The recipients of the proposal have 60 days from the date on which a proposal is issued to make any representations regarding it in writing. They will then have an opportunity to present any specific concerns in more detail. The final determination will be made following all relevant discussion, and must be in place prior to first production. It is issued when the Field Development Plan has been consented to. HMRC are notified when proposed and final determinations are issued to licensees.
Before a proposed field determination is issued, a field name must be agreed with the OGA. The name is usually discussed as part of the field development plan process, but licensees may request approval (or reservation) of a name at any time by writing to the OGA.
Fields may be re-determined at the request of any party following the acquisition of new information – either seismic or from wells – that indicates the original determination is no longer valid. An identical procedure to that described above is followed in each case.
As all fields are determined as areas of which every part is, or is part of, an area licensed under the Petroleum Act 1998, it follows that when such a licensed area is relinquished the field should be re-determined to exclude that area.
If the area covered by a Determination is relinquished in its entirety, then the Determination is no longer valid. If the area is subsequently re-licensed and re-developed, the area will be considered to be a new field ; a new Field Determination will be issued and a new field name will be required.
Where a determination extends across more than one licence, the OGA may require licensees to enter into a Unitisation and Unit Operating Agreement (UUOA) prior to submitting a field development plan. This UUOA needs to be approved by the OGA prior to field development plan approval.
The OGA’s powers to require a Unitisation between Licensees are set out in the Model Clauses of the licence. The grounds for the use of these powers are that unitisation is needed in the national interest both in order to secure the maximum ultimate recovery of petroleum and in order to avoid unnecessary competitive drilling.
Field Development Area and Unit Area
A Field Development Plan must relate to a defined area. In many cases such an area will coincide with the Field Determination. However, the Field Operator, on behalf of the Licensees, may propose that the FDP covers an area (the ‘Development Area’) that differs from the Field Determination. For example, where the Field Determination is not unitised the Development Area would usually only extend to that part of the field covered by the FDP. Another example is a phased development, where the Development Area may be limited to that part of the field addressed in the detailed first phase proposals. The Development Area may be extended with subsequent phases. The Development Area will be agreed with the OGA and documented in the FDP.
The unit area identifies that part of the field to which unit agreement refers, which will often coincide with area defined by the Field Determination. In cases where licensees do not wish to enter into a unit agreement, the licensees will need to define development areas within the field to document the different ownerships in different parts of the field.
Extended Well Tests (EWTs)
A field may need to be determined prior to an EWT if a substantial quantity of hydrocarbon is to be won and saved. This should be discussed with the OGA prior to an application for EWT consent.
The boundaries for offshore fields offshore areas (outwith the three nautical mile limit) east of the meridian six degrees west follow a latitude and longitude graticule based upon the geographical co-ordinate system ED50 (European Datum 1950).
The boundaries for offshore fields offshore areas (outwith the three nautical mile limit) west of the meridian six degrees west follow a latitude and longitude graticule based upon the geographical co-ordinate system ETRF89 (European Terrestrial Reference Frame 1989).
Onshore fields and those within the offshore onshore three nautical mile limit, are defined in grid terms based upon the projected co-ordinate system OSGB National Grid/OSGB36.
The only exceptions to this are where a field either crosses an international boundary or extends from a onshore licence to areas beyond the three nautical mile limit.
Reference should be made to the DTI Gazette article published 21 December 1999 entitled "Co-ordinate systems for UKCS Petroleum Exploration and Production Licences" for details of the co-ordinate transformation parameters to be applied when transforming between ED50, ETRF89, OSGB36 and WGS 84.
Where accumulations that overlie each other are determined as separate fields, they are defined by means of a base and/or top in depth.