Oil and Gas Office 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 PP/99/01

Oil and Gas Office 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.

Oil and Gas Office 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 Aim to circulate widely. Also considering the suitability of guarantee providers under FSAs. Need to consult financial advisers carefully.

Oil and Gas Office Other Points Need to recognise that one mans barrier is another mans safety net. Not just a DTI issue; there are stories of harsh inter- company agreements. Industry has developed creative answers to enable licence trades; isnt this a competitive issue? DTI will not reduce level of security it seeks. But happy to consider creative industry proposals.