Clyde & Co succeeds in Decommissioning Security claim before the High Court

Global law firm Clyde & Co has successfully represented its client Apache in a claim before the High Court in London, brought against Esso Exploration & Production UK, relating to decommissioning security.

Apache had sought declarations from the High Court that Esso was not entitled to additional security from Apache pursuant to Bilateral Decommissioning Security Agreements.  The additional security related to the future decommissioning costs of subsea facilities that had been constructed between 2015 and 2020 by an affiliate of Apache, after that affiliate had been purchased by Apache from Esso in 2011.

Esso had demanded additional security on the basis that it may have a potential decommissioning exposure pursuant to s.34 of the Petroleum Act 1998, deriving from the fact that s.29 notices had been served on the affiliate in 2004/2005 when it was owned by Esso.  Esso said the exposure arose because the terms in which the s.29 notices were drafted (eg “All subsea equipment including wells, protection structures and manifolds associated with the Nevis field”) were wide enough to include any and all installations identified in the relevant fields at the time when an abandonment programme is submitted. 

However the High Court accepted Apache’s submissions that the s.29 notices did not apply in respect of offshore installations that were neither existing nor intended at the time of service of the relevant notice (i.e. regardless of the breadth of the language of such a notice) and that accordingly Esso did not have a potential decommissioning exposure pursuant to s.34

Esso further contended that it was possible to treat an entire field or subfield, such as the Nevis field, as an “offshore installation”, and hence the s.29 notices would bite on this broader view of ‘offshore installation’.  The High Court rejected this as being a “broader interpretation than is justified by the definitions”.  

Esso had also sought to engage OPRED on the issues, and deployed evidence of conversations it had had with OPRED, including views expressed during these conversations in relation to the principles in issue.  OPRED was not itself a party to the proceedings.  The High Court’s view was that OPRED had not committed itself either way in discussions, “But ultimately [the issue] is a question of construction of the [Petroleum Act 1998] and OPRED’s views would not be determinative.”

The Clyde & Co team was led by partners David Bennet and Mark Walsh.

The reference for the judgment is [2021] EWHC 1283 (Comm). The full judgment can be found here.