1. This matter concerns disputes as to the amount of security to be provided in respect of decommissioning obligations related to certain hydrocarbon producing fields in the North Sea. The matter came before me as a short trial, although no oral witness evidence was led. It was well argued on both sides.
2. By an LLC Sale and Purchase Agreement dated 21 September 2011 ("the SPA"), Apache UK Investment Limited ("Apache") acquired from Esso Exploration and Production UK Limited ("EEPUK") the sole legal and beneficial ownership in Apache Beryl I Limited ("ABIL"), then known as Mobil North Sea LLC ("MNSL"). ABIL holds licences in the Beryl, Buckland, Ness, Nevis, Skene and Maclure hydrocarbon producing fields in the North Sea (the "Fields").
3. Apache and EEPUK entered into six Bilateral Decommissioning Security Agreements dated 31 December 2011 (the "BDSAs") in respect of the Fields. The BDSAs provide for security in respect of Apache's obligation under the SPA to indemnify EEPUK for all decommissioning related expenditures which EEPUK was or might become liable to incur whether such expenditures arose before, at or after the Effective Date of the SPA. The obligation to indemnify was further supported by a parent company guarantee provided by Apache Corporation, the ultimate parent company of Apache.
4. On 26 March 2020, Apache Corporation ceased to be a "Qualifying Surety" under the BDSAs. Consequently, pursuant to the terms of the BDSAs, Apache was required to provide further security in the form of Letters of Credit. The BDSAs provide a contractual process to determine the amount of the further security to be provided. The security is substantial. Not surprisingly, Apache wish to provide as little security as is possible in accordance with their obligations, and EEPUK are by contrast concerned that they might end up under secured.
5. The operation of that process of determining the amount of security has given rise to a dispute between the parties focusing on two discrete matters. The first is a matter of construction of the BDSAs. The second involves an analysis of the effect of the Petroleum Act 1998 in the events which have occurred.