PP/31/01 Financial Security Arrangements Background: Perception that provision of security for future decommissioning obligations act as a barrier to licence trading Petroleum Act DTI can require FSAs to be put in place JOAs can require FSAs to be put in place Revised DTI guidelines: DTI sought cash, Letters of Credit, Performance Bonds issued by Prime Banks (AA rating or better) DTI may consider alternate insurance schemes PCGs unlikely to be acceptable to DTI

PP/31/01 DTI/ Industry discussions to consider additional options to those set out in the Guidelines: Benefit to smaller/middle players Give DTI same/better level of comfort Need to progress range of measures acceptable to the DTI and appropriate for the industry: Cash, Bank Bonds and/or LOCs Guarantee provided by alternative UK security provider Mutual Guarantee Fund PCGs Sinking Fund Current Status:

PP/31/01 Next Steps: Get agreement that security is provided by an alternate UK security provider who satisfies agreed criteria would be acceptable. Get Industry/DTI agreement on acceptable rating level for security provider (eg start with Guidelines) JOA negotiations would be facilitated as they would have to reflect above OWNERSHIP OF NEXT STEPS?