New regulator lists UKCS ‘priority actions’

Feb. 25, 2015
The UK’s Oil and Gas Authority, responding to calls from industry and the government for prompt support of UK Continental Shelf (UKCS) exploration and production, has described “eight highest priority actions” for its first year of operation.

The UK’s Oil and Gas Authority, responding to calls from industry and the government for prompt support of UK Continental Shelf (UKCS) exploration and production, has described “eight highest priority actions” for its first year of operation.

The government formed the OGA as an economic regulator last year following recommendations of a committee chaired by Ian Wood, retired chairman the Wood Group. The Wood Review called for collaboration by the new regulator, the UK government, and industry in pursuit of “maximum economic recovery” of UKCS oil and gas (OGJ Online, Feb. 24, 2014).

The OGA is to be formally designated an executive agency of the government in August. Chief Executive Andy Samuel took office on Jan. 1.

The new report cites “two key risks that require urgent focus.” They are “that profitability of producing fields will be insufficient to attract continued investment, leading to premature decommissioning of assets” and “that confidence in the future potential of the UKCS will continue to decline, resulting in critical long-term investment not being committed.”

OGJ published its report soon after publication by the trade group Oil & Gas UK of an annual survey documenting the slowdown in UKCS oil and gas activity and highlighting the need for deep cuts in operating costs (OGJ Online, Feb. 24, 2015).

Three of the priority actions described by the OGA address the risk of insufficient profitability: protect critical infrastructure, significantly improve productive efficiency, and create a competitive cost base.

The other actions respond to the risk related to confidence: revitalize exploration, improve collaboration on decommissioning, drive investment, support the supply chain, and develop people and retain skills.

The OGA said it will:

• Continue to support the Treasury as it develops and implements a fiscal regime “which instills confidence and secures investment.”

• By April, require the top 20 UKCS producers to present stewardship-improvement plans.

• By July, recruit “a high-caliber, experienced leadership team aligned to the successful delivery of the six sector strategies” identified in the Wood Review.

• By September, “drive prioritized action and focused delivery, integrating efforts to reduce the overall number of groups and initiatives across the sector.”

• By yearend, encourage seismic acquisition in frontier and underexplored areas.

• By yearend, complete “rigorous economic assessments of key production hubs to explore the drivers of continued investment, including fiscal levers.”

• By yearend, support preparation of regional development plans for “critical regions of the North Sea,” using data provided by operators.

• By yearend, “improve the quantity, timeliness, and reliability of data and information available internally to the OGA and externally to industry.”