Apache North Sea Limited v Neo Energy Central North Sea Limited & Ors

Apache North Sea Limited v Neo Energy Central North Sea Limited & Ors

The DSA does not require the claimant to include decommissioning costs or inflation thereon in the life of field production estimates for Net Value calculation; such judgments are to be made by the Operator (and, if disputed, by the Expert) applying the Reasonable and Prudent Operator standard. The Expert is empowered to determine whether estimates have been made in accordance with the DSA and, if not, to determine what estimates should have been made, including resolving issues of construction as necessary. The effect of new tax legislation (the Energy (Oil and Gas) Profits Levy Act 2022) must be taken into account by the Expert if it constitutes a major change of tax legislation brought...

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
11 October 2024
Procedural Posture
Commercial Contractual Dispute (expedited Trial) / Judgment After Expedited Trial on Issues of Contractual Construction
Outcome
Declarations to be agreed by the parties in accordance with the judgment; in default, to be settled at the handing down of the judgment. The court resolves the construction issues as set out in the judgment.
Legal Topics
Contractual Interpretation, Expert Determination, Decommissioning Security Agreements, Dispute Resolution Clauses, Calculation of Provision Amounts, Application of Inflation and Tax Legislation in Contracts
Contract Law Oil and Gas Law Commercial Law Contractual Interpretation Expert Determination Decommissioning Security Agreements Dispute Resolution Clauses Calculation of Provision Amounts +1 more

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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 Contractual Dispute (expedited Trial) / Judgment After Expedited Trial on Issues of Contractual Construction

Legal Issues

  1. 1 Proper construction of Decommissioning Security Agreement (DSA)
  2. 2 Scope of expert determination under the DSA
  3. 3 Whether inflation on decommissioning costs should be included in life of field assessment

Ratio Decidendi

The DSA does not require the claimant to include decommissioning costs or inflation thereon in the life of field production estimates for Net Value calculation; such judgments are to be made by the Operator (and, if disputed, by the Expert) applying the Reasonable and Prudent Operator standard. The Expert is empowered to determine whether estimates have been made in accordance with the DSA and, if not, to determine what estimates should have been made, including resolving issues of construction as necessary. The effect of new tax legislation (the Energy (Oil and Gas) Profits Levy Act 2022) must be taken into account by the Expert if it constitutes a major change of tax legislation brought...

Court Disposition

Declarations to be agreed by the parties in accordance with the judgment; in default, to be settled at the handing down of the judgment. The court resolves the construction issues as set out in the judgment.

Orders

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