Licensing

This overview provides information on the licensing system for hydrocarbons (oil and gas) exploration and production onshore Northern Ireland. There are also separate sections on legislation, current licences, current licensing opportunities, guidance for applicants and licence application forms which may accessed through the side bar menu. Information about licensing is also available on the DETI website.

The Petroleum (Production) Act (Northern Ireland) 1964 ('the 1964 Act') vests the rights in petroleum in Northern Ireland in the Department of Enterprise, Trade and Investment (DETI) and enables it to grant licences that confer exclusive rights to 'search for, bore for and get' petroleum. Each of these licences confers such rights over a limited area and for a limited period.

The application and licensing process is set out in the following sets of regulations:

The Hydrocarbons Licensing Directive Regulations (Northern Ireland) 2010 ('HLD Regulations') implement EC Directive 94/22/EC of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (the 'Directive').

The arrangements for making applications, permissible terms and conditions for granting a Petroleum Licence and the model clauses which may be incorporated in a Petroleum Licence are set out in the Regulations listed above. DETI has some flexibility in the terms and conditions that it may apply to individual licences, in order to ensure the optimum exploitation of the potential petroleum resources but also to balance this with the interest of other uses of the sub-surface and the protection of the environment. In all cases DETI must act in compliance with the aims and objectives of the Directive.

Licences can be held by a single company or by several working together, but in legal terms there is only ever a single Licensee, however many companies a licence application may include. All the companies on a Licence share joint and several liability for operations conducted under it. Each Licence actually takes the form of a Deed, which binds the Licensee to obey the licence conditions regardless of whether or not s/he is using the Licence at any given moment.

History

Since the introduction of the 1964 Act, DETI has operated an ‘open door’ licensing system, i.e. a company could apply at any time for a licence over any unlicensed acreage, and applications would be processed on a ‘first come, first served’ basis. There was no licence block system and any area, up to a maximum of 350 square kilometers, could make up a petroleum licence.

Thirty-four licences have been issued since DETI have granted the first Northern Ireland petroleum licence in 1965.

Recent licensing opportunities
(29 June 2010 – 27 August 2010)

The 2010 Regulations, which came into force on 28 May 2010, set out new arrangements for making and determining Petroleum Licence applications, and modified some of the terms and conditions of petroleum licences.

A notice was published in the Official Journal of the European Union on 29 June 2010 announcing that all of Northern Ireland, excluding the internal waters, is available for petroleum licensing, and inviting applications from interested parties. Following this there was a Transitional Process for an initial phase of applications for licences in Northern Ireland where all correctly made applications received in DETI on or before 27 August 2010 were treated as having been made on that date and were considered and determined together.

In this initial phase five correctly made applications were received, one of which was subsequently withdrawn, and four licences were offered subject to terms and conditions.

Current licensing opportunities

Any licence applications submitted on or after 30 August 2010 will be considered and determined on a ‘first come, first served’ basis for any unlicensed acreage of onshore Northern Ireland.

If DETI intends to make any changes to the areas available for licensing, the application process, or the terms and conditions of the licences, it will publish a notice in the Official Journal of the European Union. Deadlines for submission of applications in response to any such notice will be stipulated in the relevant Notice.

Detailed guidance for applicants about the application process, and the terms and conditions of licences, is available on DETI’s or GSNI’s websites, or from the Minerals and Petroleum Branch, DETI, on request.

Geography

DETI is responsible for granting Petroleum Licences for all areas of Northern Ireland including the internal waters adjacent to Northern Ireland (although these internal waters have not yet been made available for licence applications). The Department of Energy and Climate Change (DECC) is responsible for granting licences in the offshore waters adjacent to Northern Ireland.

Terms (Periods)

Petroleum licences are valid for a sequence of periods, called Terms. These Terms are designed to follow the typical lifecycle of a field: exploration, appraisal, production. The Licence will move into the next Term only if the Licensee has made enough progress against its agreed Licence activities, otherwise it will expire. DETI has some discretion to extend the length of the Second Term, but only if it determines that this is necessary for the Licensee to properly perform the activities for that period.

The Initial Term is usually an exploration period and lasts up to five years. The Initial Term carries a Work Programme of exploration activity that DETI and the Licensee will have agreed as part of the application process. The Licence expires at the end of the Initial Term, or sooner if the Work Programme contains an earlier ‘Break Point’, unless the Licensee has completed the Work Programme by then. At the end of the Initial Term the Licensee must also normally relinquish a fixed amount of acreage (at least 50%), which is intended to ensure that the Licensee has explored the whole acreage by then.

The Second Term is intended for appraisal and development and lasts for five years but may be extended in certain circumstances. The Licence expires at the end of the Second Term unless DETI has approved a Development Plan by then.

The Third Term is intended for production and lasts for 20 years. DETI has the discretion to extend it if production is continuing, but DETI reserves the right to reconsider the provisions of the Licence before doing so, especially the acreage.

Relinquishments/surrenders

Licensees are entitled to 'determine' (i.e. surrender) a Licence, or part of the acreage covered by it, at any time. In fact, DETI positively encourages the surrender of acreage unless the Licensee actually intends to work it, and a minimum relinquishment of acreage at the end of the Initial Term is actually a condition of all Licences.

Partial surrenders are subject to restrictions on the complexity of the area relinquished, because DETI does not wish to create unlicensed areas so irregular in shape that they would be unattractive to other potential applicants.

Other legislation

A Petroleum Licence does not grant the Licensee carte blanche to carry out all petroleum-related activities. Some activities, such as drilling, are subject to further individual controls by DETI, and a Licensee remains subject to controls by other bodies such as the Health and Safety Executive Northern Ireland, the Planning Service and the Northern Ireland Environment Agency. Furthermore, the grant of a Petroleum Licence in no way waives the requirement for the Licensee to get any necessary permission from landowners, planning authorities, etc. It is the Licensee’s responsibility to be aware of, and comply with, all regulatory controls and legal requirements. DETI cannot offer advice on regulation outside its remit, nor on legal issues.

Last Updated: 29 June 2010