We are well into the pandemic and lockdown in many regions, so it is natural to ask the question, “when will this end and when will we return to normal”... The problem is, “normal” was not sustainable, in so many ways. Those of us in the energy industry particularly know that to be true. The “business as usual” scenario put out by the International Energy Agency in its 2019 World Energy Outlook does not make for happy reading. It had us on a crash course towards over three degrees of temperature increase due to carbon dioxide emissions from fossil fuel consumption. The IEA also has a “sustainable development scenario” which keeps us within the Paris limits of 1.5 degrees. The only problem is that, according to the OECD, we would need to spend €6.3 trillion per year globally in each of the next 10 years for us to get there. To give you a feeling for how much money that is, the total size of the global economy is estimated at around $86 trillion. And so the challenge seems virtually impossible. Read more
After Brexit, the UK Government intends to establish a UK Emissions Trading System ("UK ETS") as a key part of the plan to achieve the net zero target. Background At present, the UK participates in the EU Emissions Trading System ("EU ETS"). This is a cap and trade system which is designed to incentivise individual installations to reduce their greenhouse gas emissions year on year, by setting ever reducing caps on the emissions which each installation is permitted to emit in a given year. Each installation is required to surrender allowances in respect of its measured emissions in the relevant year. Historically many allowances were given to installations for free, but increasingly such allowances must be purchased. Installations which reduce their emissions below the cap will have excess allowances which they are able to sell, providing a further incentive to reduce emissions. The EU ETS is seen as a key part of EU legislation driving reductions in greenhouse gas emissions from the power sector, industry and flights within the EU. Read more
On 18 March 2020, the European Commission published a draft text of the Agreement on the New Partnership with the UK (the EU’s “draft agreement”); a previous draft of which had been published on 12 March 2020. Following the third negotiating round on the UK exit from the EU on 15 May 2020, the UK published on 19 May 2020 draft legal texts of a comprehensive free trade agreement (the UK’s “draft CFTA”) and a suite of accompanying, but separate, draft international agreements, two of which were a draft agreement on energy (the UK’s “draft energy agreement”) and a draft agreement on civil nuclear (the UK’s “draft civil nuclear agreement”). These drafts had been shared with the Commission during the preceding weeks, but not the Member States. Read more
Last month, the Oil and Gas Authority (the “OGA”) released a consultation paper (the “OGA Consultation”) setting out its proposals to revise the Maximising Economic Recovery Strategy for the UK (the “MER UK Strategy”). The OGA’s proposed revisions are potentially far-reaching and are aimed at positioning the UK’s oil and gas industry as a solution, rather than an impediment, to achieving the Government’s carbon neutrality targets. In this briefing we review five key changes proposed in the OGA’s consultation document, and consider their impact on participants in the oil and gas industry. The MER UK Strategy will be familiar to all participants in the industry. Since March 2016, the MER UK Strategy has had as its core obligation a requirement to “take the steps necessary to secure that the maximum value of economically recoverable petroleum is recovered from the strata beneath relevant UK waters”. The OGA Consultation, released on 6 May 2020, has been issued in the wake of the UK government’s introduction of legislation in June 2019 to achieve carbon neutrality by 2050 (the “Net Zero Target”). Read more
The updated Energy regulation section of our Beyond Brexit Legal Guide is now available.
This provides a useful overview, including:
- that the EU’s version of the draft trade agreement between the UK and the EU seems to be based on the concepts contained in the current arrangements for the internal energy market (IEM), while the UK’s proposal is centred around energy trade across interconnectors, cooperation with transmission system operators and the European Network of Transmission System Operators, and decarbonisation objectives;
- after the transition period, introduction of custom procedures and tariffs on trade between the UK and the EU may impact the energy sector;
- after the transition period, new access rules for all electricity interconnectors need to be approved in the UK and with the relevant EU Member State authorities...
If we look at the last few months, the energy markets have been hit by two crises. The first one, the most obvious, due to a slump in demand as a result of the lock-down and the halt in... Read more
Bertrand Montembault, a partner in the Paris office of Herbert Smith Freehills who has built particular experience in the oil & gas sector in Francophone Africa, will be moderating an Oil Council webinar on Thursday 25 June at 11:00 BST which will discuss “There Is No Future For Frontier Exploration”. To register for this event... Read more
The Commercial Court recently dismissed a claim to recover the cost of repairs to two offshore transmission cables linking the Gwynt Y Môr offshore wind farm in North Wales with the National Grid, which the claimant had sought to recover under an indemnity for “Pre-Completion Damage” in a business sale agreement: Gwynt Y Môr OFTO PLC v Gwynt Y Môr Offshore Wind Farm Ltd  EWHC 850 (Comm). Although the indemnity did not expressly state that “Pre-Completion Damage” was limited to damage occurring after the agreement was signed, the court... Read more
We are delighted to present an update to our European Energy Handbook. The European Energy Handbook usually reports on regulatory, legal and market developments in the European energy sector. However, these are not usual times as the COVID-19 pandemic is creating significant health, social and economic challenges worldwide, forcing governments and businesses to critically assess the impact on their people, operations and governance. In many jurisdictions, governments have made available support schemes for businesses in an effort to mitigate the consequences of the pandemic on their businesses. In this special edition, we cover 52 jurisdictions across the globe. Read more