Minister sues San Leon Energy in row over decommissioning of gas field off Cork coast

High Court reporters

The Minister for Environment, Climate and Communications is seeking judgment for €7.5 million against a company which allegedly guaranteed to pay costs of decommissioning the Seven Heads Gas Field in the Celtic Sea, off the Cork coast.

The minister is suing San Leon Energy plc, with a registered address in Ballsbridge, Dublin, which acquired the share capital of the original guarantor, Island Oil and Gas Limited, following a survival scheme for Island in 2014.

San Leon, the minister says, allegedly undertook to take over as guarantor for monies which were due for decommissioning once commercial production ceased at the gas field.

On Monday, Mr Justice Denis McDonald admitted proceedings, on the application of the minister, against San Leon over alleged default on payments for decommissioning.

San Leon opposed entry to the fast track commercial list because the demands made by the minister went back to August 2021 and, therefore, it said the claim for judgment did not have a pressing commercial urgency.

The judge said he was satisfied to enter it into the Commercial Court and adjourned the matter to February.

In his claim, the minister says two companies, PSE Seven Heads Ltd and Island (Seven Heads) Ltd, signed the first 2005 lease agreement to operate the fields, and subsequent agreements.

Island Oil and Gas, and later San Leon, guaranteed the obligations under the lease agreement, including the facility decommissioning agreement, the minister says.

The decommissioning agreement provided that the minister was conferred with the authority to enforce the lessees’ PSE and Island respective obligations to share in decommissioning costs. Commercial production at the Seven Heads field ceased in July 2020, thereby triggering the lessees' obligations, the minister says.

In the event that one of the lessees failed to pay its percentage interest share of liabilities, the other lessee was required to make up the shortfall.

PSE is the current operator under the original operating agreement and has responsibility for decommissioning, it is claimed.

The minister says total decommissioning costs amount to €7.55 million since the last quarter of 2020.

Demands for payment were made and no monies were paid.

As a result, the minister is claiming judgment for €7.55 million plus interest.