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DTI Requirements for Financial Security

PP/99/01. DTI Requirements for Financial Security. During discussions DTI recognised the need to provide better clarity to Industry on security requirements. A clear description of the current DTI process, with worked examples, was needed.

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DTI Requirements for Financial Security

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  1. PP/99/01 DTI Requirements for Financial Security • During discussions DTI recognised the need to provide better clarity to Industry on security requirements. • A clear description of the current DTI process, with worked examples, was needed. • ODU provided paper for Pilot working group on 11/09/01. Positive feedback received

  2. Brief Resume of Paper • In vast majority of cases joint and several provisions of Petroleum Act provide the necessary comfort. • Concerns have arisen in a few cases about financial strength of remaining licensees following licence transfer. • DTI has asked for additional security before releasing departing licensee from obligations. • 7 FSAs established with Secretary of State as a signatory.

  3. DTI Way Forward • Recognise that transparency required on the methodology DTI use to assess financial strength of licensees. • Not just a matter of size or credit rating; also UK assets, other decommissioning commitments, timing etc. • DTI progressing paper. Target date end 2001. Aim to circulate widely. • Also considering the suitability of guarantee providers under FSAs. Need to consult financial advisers carefully.

  4. Other Points • Need to recognise that one man’s “barrier” is another man’s “safety net”. • Not just a DTI issue; there are stories of “harsh” inter-company agreements. • Industry has developed ‘creative’ answers to enable licence trades; isn’t this a competitive issue? • DTI will not reduce level of security it seeks. But happy to consider creative industry proposals.

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