OT28410 - Decommissioning and abandonment: meaning of abandonment guarantee

FA91\S104

An “abandonment guarantee� is defined by FA91\S104(1) as a contract under which a person (the guarantor) undertakes to make good any default by a participator in an oil field (the relevant participator) in meeting the whole or any part of those liabilities of his which:

  1. arise under a relevant agreement relating to that field; and
  2. are liabilities to contribute to field abandonment costs.

An abandonment guarantee need not be expressed as a guarantee and may arise under a letter of credit, a performance bond or any other instrument.

»Ê¹ÚÌåÓýappre are four exclusions in FA91\S104(2), see OT10300 for details. »Ê¹ÚÌåÓýapp first three exclusions are unlikely to affect normal commercial contracts. However, the fourth excludes a contract where the guarantor is connected with a participator unless it is made in the ordinary course of the guarantor’s main business to provide such guarantees (FA91\S104(3)).