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Framework Agreement : Main Provisions Summary

In response to enquiries about the provisions of the 1998 Agreement (the "Framework Agreement") between the UK and Norwegian Governments relating to the laying and operation of future inter - connecting pipelines across the maritime boundary between the two States, we have prepared the following summary of its main provisions. The full text of the Agreement can be found here .

Scope

Pipelines on the continental shelf (ie excluding the parts in territorial waters and land territory) which cross the UK/Norway boundary and which link infrastructure (on the continental shelf) on one side, under the jurisdiction of one Government , with infrastructure on the other side, under the jurisdiction of the other Government. [NB: Vesterled was not covered by the Agreement because the Heimdal facilities on the Norwegian shelf and the Norwegian Frigg pipeline on the UKCS are both under Norwegian jurisdiction. Similarly, pipelines direct from, say, a Norwegian field to a UK landing terminal are outside the scope because the landing terminal would be on the UK’s land territory, not on the UKCS]. Please note that the term "petroleum" means all liquid and gaseous hydrocarbons.

Licences, authorisations, approvals and consents

Laying and operation of inter -connecting pipelines subject to authorisations:

a) Inlet flange connected to infrastructure on Norwegian shelf, outlet flange connected to infrastructure under UK jurisdiction =

Norway grants required authorisation from inlet flange to outlet flange. UK grants required authorisation from median line to outlet flange

b) Inlet flange connected to infrastructure on UK shelf, outlet flange connected to infrastructure under Norwegian jurisdiction =

UK grants required authorisation from inlet flange to median line. Norway grants required authorisation from median line to outlet flange

Route of all inter - connecting pipelines subject to consent of both Governments.

Governments to seek to agree on terms of authorisations before they are granted – arbitration available if needed. Copies of authorisations to be available to each Government. Authorisations not to be substantially altered or re -assigned without prior consultation between the Governments. No alterations to be made which would prevent unified ownership or operation or to prevent /impede the transport of petroleum. Owner of inter-connecting pipeline to establish arrangements to regulate use of the pipeline in accordance with Agreement. Governments may request copy of any agreements setting out such arrangements.

Operator

Owner to appoint an operator. Operator (and any change of operator) to be approved by both Governments. Priority and third party access

Governments to encourage optimal use of inter -connecting pipelines and take whatever measures they can to assist connections or access to such a pipeline in order for use to be made of spare capacity (without prejudicing efficient operation for the transport of petroleum owned by the owner of the pipeline).

Arrangements made by owner to regulate use of pipeline (see Licences, authorisations, approvals and consents above) shall include provisions on priorities for transport of petroleum (royalty in kind to get same priority as petroleum from field from which royalty is taken).

Dispute settlement about third party access =

Norwegian Government , where the proposed point of entry of petroleum is on Norwegian shelf

UK Government, where the proposed point of entry is on UK shelf

Governments to consult on dispute settlement, seeking to agree mutually acceptable response (arbitration available if needed). Both Governments to apply principles of non - discrimination and fairness for all parties and to take account of:

spare capacity available (allowing for owner ’s contractual obligations and reasonably expected usage)

technical compatibility of third party petroleum with already contracted petroleum in the pipeline

economic factors, including costs, tariffs and other conditions applied to use of pipeline need not to endanger security of supply or prejudice safety or environmental measures technical capability and financial viability of third party applicant other matters relevant to either Government

Government responsible for settling the dispute shall take in to account consultation with the other Government and, at least 21 days prior to informing the applicant of the outcome, shall tell the other Government how it intends to respond (arbitration available if needed). The other Government shall, on request, give effect to an agreed response.

Environmental Protection

Governments, jointly and severally, after consultation, to may every effort to ensure that laying and operation of the pipeline shall not cause pollution of the marine environment or damage by pollution to the coastline, shore facilities, vessels or fishing gear of any country. Competent authorities to develop procedures to implement environmental protection measures in the Agreement in an emergency.

Safety

Governments to consult on common construction and safety standards for inter -connecting pipelines, and to require owners to comply

Security

Nothing in the Agreement to prejudice special powers in the case of national or international emergencies. Consultations as early as possible for Governments to agree on joint measures to reconcile urgency of the situation with their common interest in most effective use of the inter -connecting pipeline.

Telecommunications

Competent authorities to agree on establishment of operation and control of radio communications relating to inter-connecting pipelines. Other communication systems to be subject as far as possible to common design standards. If no common standards, standards of each Government shall be compatible.

Exchange of information and confidentiality

Governments may exchange information received from pipeline owner as long as this does not conflict with any restrictions on disclosure. Such information received by one Government from the other to be treated as confidential with no further disclosure. But information may be used to prepare general reports. Copies of general reports to be made available to each Government by the other.

Tax

Double Taxation Convention applies.

Metering system

Quality and quantities of petroleum to be metered (entry and exit) by the pipeline owner. The metering system to be compatible with metering system of the infrastructure and to be properly installed/maintained. Where Governments have legitimate interest in metering system for quantities of petroleum entering a pipeline, the system shall be subject to agreement between their competent authorities. Competent authorities to agree on regular calibration of metering system and to consult.

Inspection

Each Government to appoint inspectors for safe and proper laying of pipelines. Inspectors to consult and co -operate. Available measures to be taken to give respective inspectors access to relevant parts of pipeline. Inspectors may order cessation of operation without consultation in cases of emergency – reasons to be reported to the Governments who will then consult to consider action necessary for safe and speedy resumption of operations. Competent authorities to consult on inspection matters.

Continued use

If the Governments agree, use and operation of a pipeline shall continue after expiration, surrender or revocation of an authorisation. The Government which had granted the authorisation shall grant a new authorisation or conduct use and operation of the pipeline itself or take other action as agreed by Governments. Any arrangement established by the owner to regulate the use of the pipeline shall continue to apply but may be subject to supplementary agreements.

If one Government considers that continued operation of all or part of a pipeline is not practical, the other Government must be given the opportunity, in consultation with the owner, to ensure continued operation on fair terms and conditions. Subject to environmental considerations, neither Government shall prevent the other from securing continued use. Where one Government takes over operation, it shall ensure that any part of the pipeline no longer in use is removed or isolated if both Governments agree that course of action.

Decommissioning

The Government shall agree measures to be taken in connection with decommissioning. If the Governments agree that continued use of all or part of a pipeline is not practical they shall require the owner to submit an decommissioning plan. The plan shall include an estimate of the costs of the measures proposed in it; details of timing of the measures or provisions on how timings are to be determined. The Governments, in considering a plan, shall take into account:

best available cost-effective techniques economic factors applicable international standards/guidelines safety hazards safety of navigation

environmental impacts impact on other sea users timetable for decommissioning financial implications and other consequences for either Government other matters raised by either Government

Governments may approve the plan with or without modifications and conditionally or unconditionally. The owner shall be given the opportunity to make representations about any proposed modifications or conditions. The Governments shall act without unreasonable delay in deciding whether to approve or reject a plan. An approved plan must be implemented. The owner shall be informed of the reasons for rejecting a plan and shall submit a revised plan with a time limit acceptable to the Governments. Arbitration is available if the Governments are unable to agree a response to an application.

Arbitration

Any disputes about the interpretation or application of the Agreement, or any other matter referred to the Governments for settlement under any agreements between a pipeline owner and a user, shall be resolved by negotiation between the Governments. If a dispute cannot be resolved in that way, or by any other procedure agreed by the Governments, either Government may request dispute settlement by an Arbitration Tribunal composed as follows:

each Government designates one arbitrator. The 2 arbitrators elect a third, who shall be Chairman and shall not be a national of or habitually reside in either country. If either Government fails to appoint an arbitrator with in 3 months of a request, either Government may request the International Court of Justice to appoint an arbitrator. The same procedure applies if, within 1 month of the designation or appointment of the second arbitrator, the third arbitrator has not been elected. The Tribunal shall determine its own procedure, except that all decisions must be taken by a majority vote. The Tribunal ’ s decisions are binding on the Governments and are regarded as agreements between the Governments.

Amendment and Termination

The Governments may amend or terminate the Agreement at any time by agreement. Either Government may request consultations on amendment to the Agreement at any time, those consultations shall commence within two months of the request and shall be conducted expeditiously. In those consultations, the Governments shall take full account of the proposals for amendment with the aim of reaching a mutually acceptable solution within the shortest possible time.

Oil and Gas Directorate March 2002