The first MER UK Strategy to enable the principal objective of “maximising the economic recovery of UK petroleum to be met” officially came into force on 18 March 2016. 

CMS published a previous Law Now on the revised Draft Strategy - the published Strategy has not changed from that draft. Our prior publication outlines the key obligations that must now be complied with. The timescale for compliance with the obligations in the Strategy is set out as being in a “timely fashion”; it is yet to be seen how that will be interpreted. 

The Strategy includes an obligation to give due consideration to potential collaboration with others in order to reduce costs, increase recovery or otherwise improve compliance is put in place, which will require a new approach from many players in the UKCS. It is stated in the Introduction to the Strategy that the aim is greater value overall, but that not all companies will always be in a better position individually; this is an element of the Strategy that the industry must come to terms with. 

As previously discussed, where a licensee cannot or does not wish to achieve maximum economic recovery, and is not successful in securing investment or divestment, where it is considered that there is still potential for a “satisfactory expected commercial return”, the licence must be relinquished. A satisfactory expected commercial return is now officially defined as: “an expected post-tax return that is reasonable having regard to all the circumstances including the risk and nature of the investment (or other funding as the case may be) and the particular circumstances affecting the relevant person”.