OT13230 - PRT: Exempt Gas - Sales or transfer of an interest in a field subject to a section 10 exempt contract

If a participator sells or otherwise disposes of its interest in a field subject to a long term OTA75\S10 exempt gas sales contract, the agreement of BGT must normally be sought and the sales agreement novated to the new participator. Thus a new legal relationship is created between the new participator and BG and where such a transaction takes place after 30 June 1975, the gas cannot be said to have been sold under a contract entered into before that date.

Prior to FA99, the legislation was silent on whether the exemption should continue in such circumstances, although the LBS Oil & Gas practice was to take the view that it did if there had been no fundamental changes in the terms of the contract with BGT. FA99\S94 gave this practice statutory authority, by treating the new contract between the new participator and BGT as the original contract for the purposes of s10 consideration, as long as again there were no fundamental changes in the terms.

For the purpose of the calculation required by OTA75\S10(1)(b), to decide if small amounts of oil not sold to BGC in an otherwise exempt gas field are “excluded oil” (see OT13200), as the calculation is done on a cumulative basis, NP is treated as having won OP’s share of oil before the transfer (FA80\Sch17\Para9).