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Oil And Gas Licences

Volume 181: debated on Tuesday 27 November 1990

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To ask the Secretary of State for Energy what is his policy on farm-in proposals for oil and gas exploration and production licences; and if he will make a statement.

Transfers of interest in petroleum licences, which are commonly known as farm-ins, are commercial transactions and, as such, the arrangements are initially a matter for the companies concerned.Under the terms of petroleum licences, such transactions also need prior consent. Like my predecessors, I believe that farm-ins have the potential to benefit United Kingdom oil and gas exploitation. They enable companies operating on the United Kingdom continental shelf to make what they regard as timely and desirable adjustments to their holdings of licence interests and they are of particular importance to those independents which wish to increase the scale and pace of their participation in exploration and development activity.In examining farm-in proposals, I shall continue to seek to ensure that the purpose for which licences have been granted—that is the thorough and efficient exploration and exploitation of the nation's oil and gas reserves—is fully safeguarded by the transactions. It is the policy and practice of my Department to consider each application on its merits. In advising me, the Department will in particular consider:

  • (a) the technical competence and financial capability of the company acquiring an interest and its intentions as regards the further exploration and exploitation of the licensed area. These factors are not only relevant when the licence is awarded: they continue to be relevant at all stages during the licence activity;
  • (b) if the application is received during the initial term of the licence, whether satisfactory progress has been made by the original licensees on the work programme attached to the licence; and
  • (c) the numbers of licensees on the licence, and the effect of any increase on efficient management of activity. I would wish to consider particularly closely any proposal to increase the number of participants in any licence or field to more than 10. I would generally expect that in the earlier licence stages there would be advantage in licence groups being somewhat smaller than this.