Apache North Sea Ltd v Neo Energy Central North Sea Ltd & Ors [2023] EWHC 1345 (Comm) (23 June 2023)

Apache North Sea Ltd v Neo Energy Central North Sea Ltd & Ors [2023] EWHC 1345 (Comm) (23 June 2023)

The DSA does not require or entitle the claimant to include the effect of inflation on decommissioning costs in the life of field assessment for the purpose of determining commercially recoverable reserves and Net Value. The calculation of Proved Reserves and Probable Reserves must be made by the Operator to the standard of a Reasonable and Prudent Operator, applying defined economic conditions, operating methods, and government regulations as identified by the Operator, but not by including decommissioning costs or inflation unless expressly required by the DSA. The expert's role is to confirm whether calculations have been made in accordance with the DSA, applying the Reasonable and...

Citation
[2023] EWHC 1345 (Comm)
Parties
Claimant: Apache North Sea Limited; First Defendant: NEO Energy Central North Sea Limited; Second Defendant: Esso Exploration and Production UK Limited; Third Defendant: Shell U. K. Limited; Fourth Defendant: BP Exploration Operating Company Limited
Jurisdiction
England and Wales
Judgment Date
23 June 2023
Procedural Posture
Commercial Court Contractual Construction Claim / Expedited Trial and Judgment
Outcome
Declarations granted in favour of the defendants on the proper construction of the DSA; claimant's contrary construction rejected.
Legal Topics
Contractual Interpretation, Decommissioning Security Agreements, Expert Determination, Calculation of Provision Amounts, Reasonable and Prudent Operator Standard
Contract Law Oil and Gas Law Commercial Law Contractual Interpretation Decommissioning Security Agreements Expert Determination Calculation of Provision Amounts Reasonable and Prudent Operator Standard

Case Brief

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Parties

Apache North Sea Limited

Claimant

NEO Energy Central North Sea Limited

First Defendant

Esso Exploration and Production UK Limited

Second Defendant

Shell U. K. Limited

Third Defendant

BP Exploration Operating Company Limited

Fourth Defendant

Procedural Posture

Commercial Court Contractual Construction Claim / Expedited Trial and Judgment

Legal Issues

  1. 1 Proper construction of Decommissioning Security Agreement (DSA) dated 1 February 2019
  2. 2 Scope of expert determination under the DSA
  3. 3 Whether the claimant is required or entitled to include the effect of inflation on decommissioning costs in the life of field assessment

Ratio Decidendi

The DSA does not require or entitle the claimant to include the effect of inflation on decommissioning costs in the life of field assessment for the purpose of determining commercially recoverable reserves and Net Value. The calculation of Proved Reserves and Probable Reserves must be made by the Operator to the standard of a Reasonable and Prudent Operator, applying defined economic conditions, operating methods, and government regulations as identified by the Operator, but not by including decommissioning costs or inflation unless expressly required by the DSA. The expert's role is to confirm whether calculations have been made in accordance with the DSA, applying the Reasonable and...

Court Disposition

Declarations granted in favour of the defendants on the proper construction of the DSA; claimant's contrary construction rejected.

Orders

  • Parties to use best endeavours to agree the terms of an order giving effect to the conclusions in this judgment.
  • In default of agreement, the terms of the declaration to be settled at the hearing at which the judgment is handed down.