Oil & Gas Sector

What you need to know about the Moveable Transactions Act:

The Moveable Transactions (Scotland) Act 2023 (the “MTSA”) came into force on 1 April 2025 and made fundamental, and very positive, changes to the commercial landscape in Scotland.  

The MTSA modernised the law by creating a new security right (the statutory pledge) that can be used to secure moveable assets.

What changed?

The MTSA has changed how companies create security over their Scottish assets. It is now easier to use valuable contractual rights as security for borrowings. It is also possible for companies to create a statutory pledge over their physical moveable assets in Scotland, such as plant and machinery and vehicles. Previously, the only way to create security over these types of assets was to transfer possession to a lender or grant a floating charge.

How will this impact on the oil & gas sector?

Much of the flexibility provided by the MTSA does not necessarily increase the classes of asset that may be subject to fixed security in typical UK offshore oil & gas production projects and facilities. This is because even for Scottish companies or companies operating within the Scottish part of the UKCS, the majority of relevant incorporeal assets – contracts, receivables and rights over bank accounts in particular – will typically be governed by English law.

There are, however, some areas where the greater flexibility provided by the MTSA may help:

Tangible Moveables: Fixed security may be taken over valuable items of plant and machinery located on installations in the Scottish area of the UKCS via the statutory pledge. However, market practice to date has not seen lenders insisting on this type of security. We expect that this may be as a result of the obvious practical difficulties of taking possession of assets located in offshore installations and may also reflect the possibly relatively low “independent” value of any such items, once removed from those installations.

Shares: It is now possible to grant a statutory pledge over shares in Scottish companies. This means that it is no longer be necessary to transfer title to the shares to create fixed security. The requirement under the old law for the transfer of title caused potentially very significant practical issues in oil and gas financing, particularly due to the risk to lenders of liability for for decommissioning costs under section 29 of the Petroleum Act 1998, and the potential requirement for NSIA approval for shares security being taken and also released. This has had a very welcome impact on upstream financing arrangements.

Bank accounts: Bank accounts located in Scotland may now be secured by way of assignation, created by registration under the MTSA rather than by intimation. An assignation created in this way can cover existing and future rights and also crucially does not require any element of “control” to be given to the assignee/security holder. However, most accounts are opened and maintained in England with lenders whose principal place of business is in England, and so we have not seen any switch to the use of Scottish bank accounts as a result of this type of security becoming easier to obtain in Scotland. 

Production licenses: The MTSA does not currently allow for a statutory pledge to be created over oil and gas production licences. However, if this class of asset is later included, the current terms of The Open Permission (Creation of Security Rights over Licences) should be wide enough to allow a statutory pledge to be granted without breaching the terms of the licence. We have not seen any negative impact on financings since the MTSA has come into force as a result of this specific type of security not yet being available. 

John Kennedy

Partner

Banking

john.kennedy@burnesspaull.com

+44 (0)1224 618558

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