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.

Restrictions

There are 2 restrictions to the licensee’s right to surrender or determine.

  1. ‘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 determinations require the Oil and Gas Authority (OGA) assent.
  2. 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 work programme with 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).

Notice periods

The OGA requires recent Offshore Production Licences (P1155 and later) to provide 1 month’s notice before determination/surrender. Be sure to submit the form in good time and specify an effective date at least 1 month in advance.

Older Offshore Production Licences specify 6 months’ notice. The OGA will often accept just one month’s notice but we reserve the right to insist on the full 6 months – especially where there is a need to plug and seal wells. Note: this may affect the licensee’s liability for rentals at the next licence anniversary, therefore the OGA strongly recommends licensees ensure there are no producing or suspended wells on any acreage before they seek to surrender/relinquish it.

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 the Secretary of State’s permission; enter the name of the departing company at Q9 in the Portal or on the form (onshore) to apply.