1. 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 1998 -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

2. 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:

3. 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?