Commercial good practice

The Wood Review highlighted the need for improved collaboration and a reduction in the commercial and legal complexity of working in the UKCS.

It challenged the industry to find ways to simplify the complexity and significantly reduce the time required for commercial and legal negotiations. Existing approaches to commercial and legal, such as the use of codes of practice and standardised agreements, are therefore being refreshed and the subsequent changes in primary legislation introduced to facilitate delivery of MER UK.

We encourage the use of relevant codes and standards to help reach agreement in an effective and timely manner, and companies should be able to demonstrate how they are achieving and monitoring compliance.

Codes of practice are normally developed using a wide range of industry views and so can represent a good practice approach to a particular area or topic.

The Commercial Code of Practice was first published in 2002 to promote co-operative value generation by means of best practice processes and senior management commitment. The Code was revised in 2016 to bring it up to date and in line with the obligations of the MER UK Strategy. Signed by the company's senior UK representative or the Commercial Director/Manager, the code is also supported by the appointment of a champion from each company who, together, form a network to promote the Code and provide a first level of escalation for disputes.

The Infrastructure Code of Practice and associated Guidance Notes provide detailed guidelines and information to aid negotiations for third party access to infrastructure. Also included are escalation steps that can ultimately lead to an application to the OGA to use our formal dispute resolution powers under the Energy Act 2011.

A number of Standard agreements dealing with common commercial negotiations have been developed by Oil & Gas UK with industry support. Work is ongoing to add to the list of standardised agreements and we recommend these agreements are used without amendment in order to achieve a rapid conclusion to relevant negotiations. 

In addition to the use of codes and standard agreements, supported by the application of formal powers, collaboration is a supporting obligation in the MER UK Strategy has been identified as a standalone stewardship expectation. This expectation requires industry to demonstrate the steps it is taking to foster and improve co-operative working, in particular within joint venture partnerships.

In 2018, further to concerns raised to the OGA by industry, Oil & Gas UK’s Commercial Manager’s Forum published the Transaction Best Practice (TBP) guidance. This focussed on the timely transfer of interest via early engagement and discussion with third parties. 

Further to concerns over the protracted nature of some asset transactions, the OGA engaged with a range of buyers, sellers, third parties and legal advisors who were involved in recent asset transactions. A summary of the engagement can be found here.