On unitization:

Where a Development Plan is proposed for a field which extends into the area covered by a neighbouring licence operated by different company the Department needs to be satisfied that the ultimate economic recovery of petroleum is maximised and that unnecessary competitive drilling is avoided. The most efficient way to satisfy these requirements and therefore avoid any possible delay in the authorisation process is for Licensees to discuss their plans with their neighbours at an early stage and propose an agreed Field Development Plan.

In cases where the Licensees have not reached an agreement the Secretary of State has powers to require a unitisation between Licensees. However, Licensees should be aware that the Secretary of State will not necessarily refuse to authorise development to a particular group of Licensees who have not concluded an agreement with the Licensees of an adjacent block on the basis that they have not concluded a unitisation agreement. The Department does not consider that powers to require unitisation extend to issues of fairness and equity between groups of Licensees. The Department's position is that proprietary rights do not exist in unextracted hydrocarbons and ownership of hydrocarbons arises only once they have been extracted under appropriate regulatory consent. The Department's acceptance or rejection of any Field Development Plan will, therefore, be on the basis of whether or not it is the optimum development in terms of maximising the economic recovery of oil and gas. If, in any intended development, there is a likelihood of claims or disagreement between adjacent licence groups related to the field's extent, the Department should be consulted at an early stage.

In order for the Licensees to understand what constitutes a Field for both Unit Development and tax purposes, the Department will issue a proposed Field Determination at an early stage in the Field Development Plan authorisation process, utilising the geological information that is available to it at that time.