Energy Act 2004 - oil and gas implications

Introduction

The Energy Act received the Royal Assent on 22 July 2004 and will come into force on days appointed by the Secretary of State. The Act covers three key areas, nuclear energy, renewable energy and energy markets and regulation. An overview of the main provisions of the Act can be accessed by clicking here.

This article focuses on the key implications of the Act for the oil and gas industry.

Overlap of oil and gas activities and renewable energy development

Section 103 creates a new Section 47A of the Petroleum Act 1998 – "Factors for the Secretary of State to take into account". The new Section is designed to address the potential overlap of oil and gas activities and renewable energy development. Where a site may be suitable for both activities, the Secretary of State may have regard, in performing his duties under the Petroleum Act, to the generation of electricity and related activities.

Power to impose charges to fund energy functions

Under Section 188, the Secretary of State may make provision to levy new charges in respect of his energy functions (including those functions connected with the exploration or production of petroleum, the supply of petroleum and gas, offshore installations and the protection of the environment from activities connected with the foregoing). For example, it is envisaged that new charges may be levied on the approval of field development plans or environmental inspections, drafting consents, pipeline authorisations, metering inspections and flaring. The purpose of the section is to ensure that the users of such services shall be the ones who bear such costs.

Power to modify Petroleum Act 1998

Under Section 189, modifications may be made to the Petroleum Act 1998 for the purposes of ensuring that effect is given to international agreements which relate to the construction, operation, use, decommissioning, or abandonment of a pipeline or an offshore installation (for example, the treaty between the UK and Norway for the development of the Ormen-Lange Field). The power to modify the Petroleum Act includes the power for provisions made under the Act to have effect extraterritorially. Modifications to the Petroleum Act could reflect the fact that an international agreement provides that disputes over access to a pipeline shall be subject to co-determination by the UK and the other State. As it currently stands, the Petroleum Act 1998 restricts the Secretary of State's power to make a determination in relation to pipelines outside UK waters.

While the provisions of the Act relating to the oil and gas industry are fairly specific, the Act does pave the way for the development of the offshore renewables energy sector, which may have significant regulatory and commercial implications for the oil and gas industry. It also paves the way for the development of new, international, pipeline systems, which will be crucial to the UK's energy needs in the near future.

For further information or advice about the Act please contact Robert W M Palmer at [email protected] or Norman Bissett at [email protected] .