How to relinquish a licence
How to relinquish a petroleum licence or surrender acreage; notice periods.
There are two ways in which the licensee of a Production Licence can relinquish licensed acreage:
- ‘surrender’ part of the licensed area while the licence continues over the remaining area; or
- ‘determine’ the entire licence.
The words ‘surrender’ and ‘relinquish’ are commonly used interchangeably for either action. The licensee can do either at any time, subject to a few restrictions, but neither action relieves the Licensee of any licence obligations or liabilities already incurred. Exploration Licences cover the whole UKCS (landward area in the landward case) except for the acreage covered at the time by Production Licences, so acreage cannot be surrendered from an Exploration Licence.
There are 2 restrictions to the licensee’s right to surrender or determine.
- ‘Non-standard’ surrenders – irregular shapes defined by very short lines, or surrenders that leave a very small licensed area. The exact definition is in the clause titled ‘Areas surrendered’ within each licence (see the 2004 Model Clauses Regulations for example). Non-standard surrenders require the Oil and Gas Authority (OGA) assent.
- A licensee may not make a surrender or determination if it would prevent fulfilment of a licence obligation, e.g. where a licence carries a firm work programme such as a Firm Well Commitment, the licensee cannot determine the licence without drilling the well (or surrender acreage if it includes a location specified in the commitment as the place where the well is to be drilled), unless the Firm Well Committment is transferred to a different licence by prior agreement with the OGA.
The OGA requires 'newer' Offshore Production Licences (P1155 and later) to provide 1 month’s notice before determination/surrender. Be sure to submit your application via the Energy Portal in good time and specify an effective date at least 1 month in the future.
'Older' Offshore Production Licences specify 6 months’ notice. The OGA reserve the right to insist on the full 6 months, especially where there is a need to plug and seal/abandon (or P&A) wells.
The above also applies to Onshore licences, but in either case please check your licence Model Clauses to establish your notice period length. Note: if the correct amount of notice is not given, this may affect the licensee’s liability for rentals.
It is the OGA’s policy to serve Well P&A Notices on all relinquishments on certain older licences (e.g. P1038 and earlier for offshore) where the Model Clauses do not automatically impose an obligation on licensees to P&A wells pre-relinquishment. Please refer to your licence Model Clauses to establish the P&A requirement. The OGA strongly recommends licensees ensure there are no producing wells – and no suspended wells for licences P1038 and later – on relevant acreage before they seek to surrender/determine the licence.
Company loss of licence involvement
Even though a surrender may occasionally leave a company without beneficial interest under the licence, the surrender does not remove that company from the licence. It will remain a party to the licence unless and until it withdraws by assigning its rights to the remaining companies. An assignment is often made effective on the same date as the surrender, but it does not need to be. Note: all assignments require prior consent of the OGA. Further information on Licence Assignments can be found here.