1 Oil and Gas Law Current Practice and Emerging Trends Editors: Greg Gordon, John Paterson and Emre Üşenmez Dundee University Press 2nd edition
2 OIL AND GAS LAW CURRENT PRACTICE AND EMERGING TRENDS 2nd edition Editors Greg Gordon, LL.B., Dip. L.P., LL.M., Senior Lecturer in Law, University of Aberdeen John Paterson, LL.B., Dip. L.P., LL.M., Ph.D. Professor of Law, University of Aberdeen Emre üşenmez, B.Sc., B.A., LL.M. Lecturer in Law, University of Aberdeen DUNDEE UNIVERSITY PRESS 2011
3 First edition published in Great Britain in 2007 by Dundee University Press University of Dundee Dundee DD1 4HN Second edition published 2011 Reprinted 2012, 2013, 2014 Copyright Judith Aldersey-Williams, Martin Ewan, Greg Gordon, Luke Havemann, Alexander Kemp, Nicola Macleod, Roderick Paisley, John Paterson, Margaret Ross, Scott C Styles, Uisdean Vass, Emre üşenmez and Norman Wisely ISBN All rights reserved. No part of this publication may be reproduced, stored or transmitted in any form, or by any means, electronic, mechanical or photocopying, recording or otherwise, without the express written permission of the publisher. The rights of Judith Aldersey-Williams, Martin Ewan, Greg Gordon, Luke Havemann, Alexander Kemp, Nicola Macleod, Roderick Paisley, John Paterson, Margaret Ross, Scott C Styles, Uisdean Vass, Emre üşenmez and Norman Wisely to be identified as the authors of this work have been asserted in accordance with the Copyright, Designs and Patents Act No natural forests were destroyed to make this product; only farmed timber was used and replanted. British Library Cataloguing-in-Publication Data A catalogue for this book is available on request from the British Library. Typeset by Fakenham Prepress Solutions, Fakenham, Norfolk NR21 8NN Printed and bound by Bell & Bain Ltd, Glasgow
4 CONTENTS Foreword to the First Edition Preface to the First Edition Preface to the Second Edition List of Contributors List of Abbreviations and Acronyms Table of Cases Table of Statutes Table of Statutory Instruments Table of European Legislation Table of International Instruments vii ix xi xiii xv xxi xxxi xlix lxiii lxix 1 Oil and Gas Law on the United Kingdom Continental Shelf: Current Practice and Emerging Trends 1 Greg Gordon, John Paterson and Emre üşenmez 2 Evolving Economic Issues in the Maturing UKCS 15 Alex Kemp 3 The UK s Energy Security 33 Emre Üşenmez Licensing and Regulation 4 Petroleum Licensing 65 Greg Gordon 5 Mature Province Initiatives 111 Greg Gordon and John Paterson 6 The UKCS Fiscal Regime 137 Emre Üşenmez 7 Access to Infrastructure 161 Uisdean Vass 8 Health and Safety at Work Offshore 187 John Paterson
5 vi oil and gas law 9 Environmental Law and Regulation on the UKCS 231 Luke Havemann 10 Decommissioning of Offshore Oil and Gas Installations 285 John Paterson 11 Competition Law and the Upstream Oil and Gas Business 331 Judith Aldersey-Williams Contracting and Commercial Issues 12 Joint Operating Agreements 359 Scott C Styles 13 Unitisation 411 Nicola Macleod 14 Risk Allocation in Oil and Gas Contracts 443 Greg Gordon 15 Law and Technology in the Oilfield 499 Martin Ewan 16 Acquisitions and Disposals of Upstream Oil and Gas Interests 523 Norman Wisely 17 Aspects of Land Law Relative to the Transportation of Oil and Gas in Scotland 551 Roderick Paisley 18 Dispute Management and Resolution 573 Margaret Ross Index 611
6 FOREWORD to the first edition I write this Foreword at a time when crude oil prices have jumped to a record high of over US $80 a barrel (West Texas Intermediate). At the same time, there is a world credit crunch, and it remains to be seen what impact this will have upon the oil and gas sector. At a recent major conference of the Association for the Study of Peak Oil, Lord Oxburgh (the former chairman of Shell) gave a stark warning that the price of oil could hit US $150 per barrel and that oil production could peak within the next 20 years. The rapid increase in the price of oil seems inevitable as demand continues to outstrip supply. However, it is also going to become very expensive indeed to extract oil from the ground. We already see that in our maturing province in the UKCS, with a considerable increase in costs for operating and developing oil and gas fields. This is an industry in a state of flux, and there is a great responsibility on industry lawyers and commercial negotiators to come up with innovative business models and flexible, streamlined legal agreements and processes to facilitate the maximum recovery of remaining reserves in the UKCS. This we must do by working closely with our technical colleagues who are charged with developing increasingly innovative and cost-effective technical solutions to reserves recovery. It is also the responsibility of lawyers, along with our commercial, tax and finance colleagues, to be effective advocates for appropriate changes to UK oil and gas legislation to ensure a successful future for the UKCS. To meet this responsibility, the industry needs dynamic and competent advice at a time when we are experiencing an extreme shortage of experienced oil and gas lawyers. It is all the more important, then, that lawyers coming into our industry have access to reliable and up-to-date reference books on oil and gas law. If we are to meet the challenges ahead, we must pass on the knowledge we already have to a new generation of lawyers; this book helps enormously in that task. Often our oil and gas industry leaders decry lawyers as those who simply paper the deals and arrangements put in place by technical and commercial people. This book goes a long way towards dispelling that myth. It shows the complexity and sophistication of oil and gas law, and its breadth. UK oil and gas law is formed by a layering of statute, commercial agreements, EU and UK competition and procurement law, industry voluntary codes (such as CCOP and ICOP) and DBERR Guidance. Oil and gas law is a very important
7 viii oil and gas law field of law and yet there are very few reference sources. This volume is long overdue and very welcome. It describes, in depth, most of the recent developments in this very broad and diverse field. Most importantly, it captures with great clarity the many joint industry and government initiatives since 2000 which impact the legal and commercial arrangements in our sector, for instance those on fallow acreage, stewardship, CCOP and ICOP. It is also the first time the legal basis for these initiatives has been analysed in detail. There is an enormous challenge ahead. In a time of high oil prices, owners of infrastructure inevitably wish to protect their own production and fair allocation of risk remains difficult to achieve. The mutual hold harmless principle is being pushed to its limits, with creeping practices of uncapped liability and indemnity clauses on third-party infrastructure users. As an industry lawyer for the past 15 years, I have been passionate about improving the way the industry conducts its business to take duplication and waste out of legal processes. This began in 1995 when I worked on the setting up of First Point Assessment Ltd ( FPAL ) and the development of the Memorandum and Articles for the new entity. It is with pride that I note that FPAL celebrated its 10th anniversary at Offshore Europe this month. It has been an enormous privilege for me to have played a part in many of the industry legal working groups which have brought about streamlined agreements (IMHH, Standard Contracts, ICOP, DSA, SPA and Master Deed). We can be proud of what has been achieved and the contribution made by industry and private practice lawyers alike to such progress. This book is an excellent consolidated source on all of these important initiatives and is testimony to the considerable progress made. May it foster even greater academic enquiry and innovation among oil and gas lawyers. In summary, never has oil and gas law been more complex, never have the expectations of government and industry leaders on lawyers and commercial advisers been higher and all this at a time of uncertainty as to how the oil and gas market will play out. The industry requires highly competent future lawyers, great clarity of legal thinking and drafting and above all else swift close-out of transactions. This excellent book stands us in good stead for meeting the exciting challenges ahead. Jacquelynn F Craw Legal Manager, Director and Company Secretary Talisman Energy (UK) Ltd September 2007
8 Preface to the first edition This book arose as a result of several inter-related stimuli. In developing the LL.M. in Oil and Gas Law, upon which course the editors and several of the book s contributors teach, it became increasingly apparent that while there has been a constant throughput of primary materials in the form of statutes, statutory instruments, guidance and codes, surprisingly little in the way of secondary comment has been published in the area of UK oil and gas law over the years. Moreover, although much of the work published is of a very high standard, there are some noticeable gaps in coverage and some of the works which are available, and which continue to be of great value, are beginning now to show their age as the UKCS develops and new issues become increasingly relevant. 1 In addition, many of the materials which are available assume a considerable degree of industry knowledge and experience. It can be difficult for a student, or indeed a qualified lawyer making his or her way into the industry, to find a book which will provide a clear but concise account. Finally, many of the books which are available are so highly priced that they are prohibitively expensive to students, and indeed many libraries. The decision to write this book was taken by the editors over coffee while discussing these matters. Much coffee has been drunk by the editors since. The editors have many people to thank. Our most obvious debt is to the contributors. The book could not have been produced within a reasonable timescale if the editors had had to write it all themselves, and some of the chapters here could not have been written at all. In addition to writing chapters within the book, Margaret Ross, Roderick Paisley, Norman Wisely, Judith Aldersey-Williams and Uisdean Vass read and offered useful comments upon other chapters. Valuable comments have also been received from Lorna Hingston of CMS Cameron McKenna, Bob Ruddiman of McGrigors and Angus Campbell of the University of Aberdeen. The editors are very grateful to all of them for taking the time and trouble to assist. The editors are also very grateful to Carole Dalgleish for commissioning 1 This observation does not apply to Daintith, Willoughby and Hill s excellent and regularly updated UK Oil and Gas Law.
9 x oil and gas law the work, and to her and all involved at Dundee University Press for their unfailing commitment and encouragement. This book is not intended to supplant existing materials, but to supplement them, and hopefully to bring them to the attention of a wider readership. Nor is it intended to be a comprehensive exposition of all legal issues facing the oil and gas industry in the UKCS. There is more that could usefully be said in relation to many of the areas which have been covered, and many other topics could have been selected were it not for the constraints of space and time. 2 Finally, it is hoped that this book will go some way towards stimulating more writing about, and more debate in, what is a fascinating and important area of (or perhaps more properly, context for) the law. Towards that end, the editors invoke the spirit of Sir John Skene s dedication to the reader: Quhatever I have done, I did it nocht to offend thee or to displease anie man, bot to provoke uthers to doe better. 3 Greg Gordon John Paterson August Environmental law, for instance, is dealt with at several points, but considerations of environmental law as relative to the oil and gas industry could very easily form the subject of a large book on their own. 3 Sir John Skene, De Verborum Significatione (1597).
10 PREFACE TO THE SECOND EDITION It is very gratifying to see the book go into a second edition. The editors aim in producing the first edition of this work was to provide a clear, reasonably concise and affordable account of contemporary oil and gas practice in the UKCS. That aim is unchanged. The book attempts to describe the law as it stood in January 2011, but it has been possible to incorporate at proof stage passing reference to some later developments. As before, the editors have many people to thank. First, the new contributors (Martin Ewan, Luke Havemann and Emre Üşenmez) who have allowed us to expand the scope of the book by authoring chapters on technology in the oilfield, environmental regulation, energy security and taxation. The inclusion of these topics is of great benefit to the book. Second, we must thank all of the original contributors who kindly agreed to update their chapters. Law and practice have certainly not stood still in the 4 years since the first edition of this book was published and in many cases this has involved a significant amount of work. Thanks are also due to David Roper for his preparatory work in the chapter on technology in the oilfield. The editors are also grateful to Christine Gane for allowing us to use her index for the first edition as the basis for the second and to Karen Howatson at Dundee University Press for updating the index. We would also like to thank Carole Dalgleish and all involved at Dundee University Press for their ongoing commitment and support. Finally, the original editors are delighted to welcome Emre Üşenmez to both the editorial team of this work and the lecturing staff at the University of Aberdeen. Emre has undertaken a significant amount of the editing work for the new edition as well as contributing two new chapters to the book. He also makes a mean cup of coffee. This is not something we say lightly; readers of the preface to the first edition will know the importance which that beverage has played since the very inception of this book. But we should also emphasise that Emre was recruited on the basis of his legal and analytical skills alone. Greg Gordon John Paterson Emre Üşenmez April 2011
11 LIST OF CONTRIBUTORS Judith Aldersey-Williams, B.A., LL.M., Solicitor Partner, CMS Cameron McKenna LLP Martin Ewan, LL.B., Dip.L.P., LL.M., M.A., B.Sc., M.Sc., Solicitor Partner, McGrigors LLP Greg Gordon, LL.B., Dip.L.P., LL.M. Senior Lecturer in Law, University of Aberdeen Luke Havemann, B.A., LL.B., Ph.D., Attorney-at-Law Director, Havemann Inc, Specialist Energy Attorneys Professor Alexander Kemp, O.B.E., F.R.S.E. Schlumberger Professor of Petroleum Economics, Business School, University of Aberdeen Nicola Macleod, LL.B., Dip.L.P., LL.M., Solicitor Director: Legal, Maersk Oil North Sea UK Ltd Professor Roderick Paisley, LL.B., Dip.L.P., Ph.D., Solicitor Professor of Commercial Property Law, University of Aberdeen John Paterson, LL.B., Dip.L.P., LL.M., Ph.D. Professor of Law, University of Aberdeen Professor Margaret Ross, LL.B., Solicitor Professor of Law, University of Aberdeen Scott Styles, M.A., LL.B., Dip.L.P. Senior Lecturer in Law, University of Aberdeen Uisdean Vass, LL.B., LL.M., Solicitor Partner, Head of Oil and Gas Unit, Maclay, Murray and Spens LLP Emre Üşenmez, B.Sc., B.A., LL.M. Lecturer in Law, University of Aberdeen Norman Wisely, LL.B., Dip.L.P., Solicitor Partner, CMS Cameron McKenna LLP
12 LIST OF ABBREVIATIONS AND ACRONYMS AA AAA/ICDR AAPL ADR AFE AIPN ALARP AMI API ARN ASCOBANS BAT BATNA BEP BNOC boe BPEO CAEM CAR CCS CCW CEDR CEFAS CERM CGT CIMAH CMR COMAH appropriate assessment American Arbitration Association/ International Court of Dispute Resolution American Association of Professional Landmen alternative dispute resolution authorisation for expenditure Association of International Petroleum Negotiators as low as reasonably practicable Area of Mutual Interest Agreement American Petroleum Institute automatic referral notice Agreement on Small Cetaceans of the Baltic and North Seas Best Available Technique best alternative to a negotiated agreement Best Environmental Practice British National Oil Corporation barrels of oil equivalent best practicable environmental option Center for the Advancement of Energy Markets Construction All Risk carbon capture and storage Countryside Council for Wales Centre for Effective Dispute Resolution Centre for Environment, Fisheries and Aquaculture Science Co-ordinated Emergency Response Measures Capital Gains Tax Control of Industrial Major Accident Hazard Regulations (1984) Convention on the Contract for the International Carriage of Goods by Road Control of Major Accident Hazard Regulations (1999)
13 xvi oil and gas law CPA 1949 Coast Protection Act 1949 CPC central product classification CPR Civil Procedure Rules (1998) CRINE Cost Reduction Initiative for the New Era CSIS Center for Strategic & International Studies CT Corporation Tax CTA 2010 Corporation Tax Act 2010 DBERR DEAL DECC DEFRA DEn DNV DOPWTS DSA DTI Department for Business, Enterprise and Regulatory Reform Digital Energy Atlas and Library Department of Energy and Climate Change Department of Environment, Food and Rural Affairs Department of Energy Det Norske Veritas Dispersed Oil in Produced Water Trading Scheme decommissioning security agreement Department of Trade and Industry EA environmental assessment EAT Employment Appeal Tribunal EC European Community ECJ European Court of Justice ECT Energy Charter Treaty EEA European Economic Area EIA environmental impact assessment EMT Environmental Management Team EMV expected monetary value EPC Regulations Offshore Installations (Emergency Pollution Control) Regulations 2002 ERA Employment Rights Act 1996 ES environmental statement EU European Union FEPA 1985 Food and Environment Protection Act 1985 FPAL First Point Assessment Ltd FPSO floating production, storage and offloading FRS Fisheries Research Services FSA Formal Safety Assessment FY financial year GAAP GATT generally accepted accounting practice General Agreement on Tariffs and Trade
14 list of abbreviations and acronyms xvii GDP GFU GLA gross domestic product Norwegian Gas Negotiation Committee General Lighthouse Authority H 2 S hydrogen sulphide HMRC Her Majesty s Revenue and Customs HP/HT high pressure/high temperature HSC Health and Safety Commission HSE Health and Safety Executive HSWA 1974 Health and Safety at Work, etc Act 1974 IAPP Certificate IATA ICC ICOP ICSID IEA IEP Agreement IGIP IMCA IMHH IMO IP IRR IT ITF IUK JBA JNCC JOA JOAUOA JOC JV International Air Pollution Prevention Certificate International Air Transport Association International Chamber of Commerce Infrastructure Code of Practice International Centre for Settlement of Investment Disputes International Energy Agency Agreement on an International Energy Program initial gas in place International Maritime Contractors Association Industry Mutual Hold Harmless Deed (strictly, the Mutual Indemnity and Hold Harmless Deed) International Maritime Organization intellectual property internal rate of return Income Tax Industry Technology Facilitator Interconnector UK Ltd joint bidding agreement Joint Nature Conservancy Council joint operating agreement joint operating and unit operating agreement Joint Operating Committee joint venture KP3 Key Programme 3 LCIA LCP LCPD London Court of International Arbitration large combustion plant Large Combustion Plants Directive
15 xviii LNG LOC LOGIC oil and gas law liquefied natural gas letter of credit Leading Oil and Gas Industry Competitiveness MC Model Clause MCA Maritime and Coastguard Agency Merchant Shipping Merchant Shipping (Oil Pollution (OPRC) Preparedness, Response and Co-operation Regulations Convention) Regulations 1998 mmb/d million barrels of oil per day MOOIP moveable oil originally in place NARUC National Association of Regulatory Utility Commissioners NEC Regulations National Emission Ceilings Regulations 2002 NERC Natural Environment Research Council NH 3 ammonia NO x nitrogen oxide NPV net present value NPV/I net present value to investment ratio NSRI NTS National Subsea Research Institute National Transmission System or non-technical summary (in ES) OC Regulations Offshore Chemical Regulations 2002 OCA Offshore Contractors Association OECD Organization for Economic Co-operation and Development OED Offshore Environment and Decommissioning Unit OFT Office of Fair Trading OGIA Oil and Gas Independents Association OGITF Oil and Gas Industry Task Force ONS Office for National Statistics OPA Regulations Offshore Petroleum Activities (Oil Pollution Prevention and Control) Regulations 2005 Opcom Joint Operating Committee OPEC Organization of the Petroleum Exporting Countries OPOL Offshore Pollution Liability Agreement OSPAR Convention for the Protection of the Marine Environment of the North-East Atlantic 1992 OSPRAG Offshore Spill Prevention and Response Advisory Group
16 list of abbreviations and acronyms xix OTA 1975 Oil Taxation Act 1975 OTA 1983 Oil Taxation Act 1983 PAPS Regulations PCG PED PEDL PILOT PON PPSGS Regulations PPWG PRT PSPA PTW QCI QRA RFCT ROV RPGA SAC SC SEA SEAM SECA SEPA SGERAD SMS SNH SO 2 SOAEFD SPA STOOIP Merchant Shipping (Prevention of Air Pollution from Ships) Regulations 2008 parent company guarantee Petroleum Engineering Division (of the Department of Energy) petroleum exploration and development licence successor to the Oil and Gas Industry Task Force Petroleum Operation Notice Merchant Shipping (Prevention of Pollution by Sewage and Garbage from Ships) Regulations 2008 Progressing Partnership Work Group Petroleum Revenue Tax Petroleum and Submarine Pipelines Act 1975 permit to work qualifying combustion installation Quantified Risk Assessment Ring Fence Corporation Tax remotely operated vehicle Rules and Procedures Governing Access to Offshore Infrastructure Special Area of Conservation Supplementary Charge strategic environmental assessment Senior Executive Appraisal Mediation SO x emission control area Scottish Environment Protection Agency Scottish Government Environment and Rural Affairs Department Safety Management System Scottish Natural Heritage sulphur dioxide Scottish Office Agriculture, Environment and Fisheries Department Special Protection Area stock tank oil originally in place
17 xx oil and gas law t tonnes (metric) TDM Transnational Dispute Management TFEU Treaty on the Functioning of the European Union toe ton oil equivalent TPA transport and processing agreement TWJA 1878 Territorial Waters Jurisdiction Act 1878 UCTA Unfair Contract Terms Act (1977) UK LIFT United Kingdom Licence Information for Trading UKAPP Certificate United Kingdom Air Pollution Prevention Certificate UKCS United Kingdom Continental Shelf UKOOA United Kingdom Offshore Operators Association (now Oil & Gas UK Ltd) UNCITRAL United Nations Commission on International Trade Law UNCLOS United Nations Convention on the Law of the Sea UOA unit operating agreement UUOA unitisation and unit operating agreement VOC WSCA WTO volatile organic compound Well Services Contractors Association World Trade Organization
18 chapter 1 OIL AND GAS LAW ON THE UNITED KINGDOM CONTINENTAL SHELF: CURRENT PRACTICE AND EMERGING TRENDS Greg Gordon, John Paterson and Emre Üs enmez If there is one word that best describes the United Kingdom Continental Shelf (UKCS) at the beginning of the second decade of the 21st century, it is mature. The UKCS is no longer a new frontier of oil and gas exploration, with the steep climb up the production profile ahead of it and the principal question being how high that profile will rise. Rather, it is an established hydrocarbon province on the downward slope of the production profile, with the main question being how steep that decline will be. Presenting the current situation in those terms may appear to raise the question not only of why a new book on the subject of the law affecting oil and gas operations on the UKCS was required in 2007, but perhaps even more one of why a second edition is already required: in so far as the UKCS appears to be in the endgame, is not the legal picture already fairly clear? To the contrary, however, it is the very fact that the UKCS is now a mature province that provided the rationale for the first edition of this book and explains the need for this expanded update: maturity can present existing problems and challenges in a new light and has the potential continually to throw up new problems and challenges. Accordingly, each of the contributors to this book responds to the issue of maturity to a greater or lesser extent, depending on the precise subject they are treating. Maturity, of course, also has a much more positive aspect: the accumulation of years also means the accumulation of experience. The industry and the Government (and their respective lawyers) have learned a great deal in the almost 50 years of hydrocarbon
19 2 oil and gas law operations on the UKCS. Mistakes have been made along the way and lessons have sometimes been learned the hard way. But the legal and regulatory framework that is now in place on the UKCS can justifiably claim to be one of the most advanced anywhere in the world. Maturity therefore brings challenges, but that same maturity leaves the UKCS well placed to respond to them. An insight into the geological roots of maturity and a comprehensive overview of the economic implications are provided by Alex Kemp in the second introductory chapter to this book. Put at its most simple, a mature province is one in which the likelihood is that all of the major fields have been discovered and that new discoveries will be relatively small scale. Beyond that, a mature province is one in which the focus of industry and of the government is on the steepness of the decline of the production profile: where is the balance to be struck between the Government s desire to extend selfsufficiency (or at least the contribution of domestic production to the balance of payments and to energy security) and the industry s desire to invest in projects (wherever in the world those happen to be) where it can maximise its return? These basic characteristics of the mature province ramify in a variety of different and sometimes unexpected ways. Kemp goes on to review the economic dimension of a number of issues that are treated in more detail from the legal perspective by other contributors to this book. Thus, he considers the way in which the Government has adapted the licensing regime to encourage new entrants as well as the exploration and development of frontier areas. As regards existing fields, Kemp notes the range of initiatives entered into jointly by government and industry to respond to the challenges of maturity (including those relating to fallow blocks/discoveries, access to infrastructure and Stewardship) and reviews the current debate surrounding taxation. At the other end of the lifespan of a field, he considers the way in which uncertainty surrounding decommissioning liabilities has an impact on investment decisions as regards both new and existing developments and notes the deleterious effect which the Government s ultra-cautious approach may have on the national interest. On the fiscal side, he notes and welcomes the Government s recent attempt to encourage high-cost development through the provision of field allowances against Supplementary Charge and notes the inherent instability in the UK s system of taxing oil and gas revenues, and the barrier to investment which that represents. He concludes, however, on a positive note, with a summary of the results of recent economic modelling which show that as long as the oil price does not dip the UKCS still has a bright long-term future. The third introductory chapter, written by Emre Üs enmez, who joins the book in this second edition as both a contributing author
20 oil and gas law on the uk continental shelf 3 and co-editor, deals with the issue of energy security in the UK. Although energy security is commonly viewed from the perspective of consumers, Üs enmez distinguishes the dual identities of the UK as an energy producer and a consumer state and highlights the policies aimed at ensuring energy security from both perspectives. Within this context the definition of energy security is not confined to the security of energy supplies and of the associated infrastructures but also includes the demand security and market access. Following a brief discussion setting out the UK s energy context, Üs enmez first discusses the international dimensions of the UK s energy security, particularly the development of consumer nations responses to certain energy crises. The discussions focus on the International Energy Agency s (IEA s) Co-ordinated Emergency Response Measures (CERM), and on the Energy Charter Treaty (ECT) within the contexts of supply disruption response mechanisms, energy supplier diversification and access to markets. Üs enmez then introduces the European Union dimensions of the UK s energy security. He argues that although the majority of EU policies some developing in parallel with the IEA measures have a very positive impact, some of the climate change policies may have an adverse impact on the UK s energy security. With the EU s Third Energy Package, homogenous liberalisation of the internal gas market would go a long way towards alleviating potential artificial arbitrage issues. On the other hand, the Large Combustion Plants Directive (LCPD), for example, which aims to reduce emissions of acidifying pollutants, will bring forward the closure of certain power plants without there being the capacity to fill the resulting power deficit from renewable sources but rather only from newly constructed gas-fired power stations. This in turn will increase the UK s import dependency. When viewed from the UK s producer state identity, therefore, the policies aimed at increasing indigenous production are equally important. As Kemp notes in the previous chapter, fiscal incentives, particularly the field allowances against Supplementary Charge (which are further discussed in Chapter 6), are welcomed policies despite further contributing to fiscal instability. Üs enmez also identifies certain non-fiscal incentives, specifically the variations in the offshore licences (discussed in detail in Chapter 4), as welcome developments, while drawing attention to two of the main investment difficulties for the industry: access to equity and credit, and access to infrastructure. The latter issue is discussed in detail by Uisdean Vass in Chapter 7. Üs enmez concludes that the policies implemented since the 1960s have made a significant contribution to the multi-dimensional challenges to the UK s energy security. However, as the UKCS progressively matures, changing the nature of the challenges, it will be difficult to assess the adequacy of the existing energy security structure.