Back in January I wrote about what we might expect from OGA during 2017. OGA has largely delivered on those expectations.
Licensing
We have seen the implementation of a more flexible licensing system through changes to the Model Clauses made by The Petroleum and Offshore Gas Storage and Unloading Licensing (Amendment) Regulations 2017. These amend the date on which a licence is considered to have commenced, allow a licence to be extended more easily where production is continuing at its normal expiry date, and implement fully the ‘Innovate Licence’ concept, first used for the 29th Licensing Round, by offering a staged work programme and a bespoke Initial Term.
The 29th Round awards in March saw 25 licences for more challenging “frontier areas” offered to 17 companies, who praised OGA’s publication of seismic data for the region as a key factor in their interest.
The 30th Round, which closed on November 21, offered 813 blocks or part blocks in mature areas of the UKCS, some of which have not been on offer since 1965. The round was again accompanied by the release of significant data packages. Decisions on applications are expected in the second quarter of 2018.
Information
gathering
OGA has focused heavily on information gathering in its activity over the past year. One of OGA’s earliest tasks has been to try to establish a ‘base line’ of reliable industry information against which it can measure their (and its) progress, by means of one annual UKCS Stewardship Survey. This allows OGA to benchmark companies’ activities against their peers’ and to gather the data it needs to build economic models and inform its area plans. It has published various reports based on its first survey including a Recovery Factor Benchmarking Report, and a Reserves and Resources report. The second Annual Stewardship Survey launched on November 1, 2017, with improvements based on feedback from the first.
OGA has also published two lessons learned reports. ‘The Lessons Learned from UKCS Oil and Gas Projects 2011-2016’ reviewed 58 major projects to identify ways to improve cost and time efficiency in project delivery. Its principal findings included the fact that less than a quarter of oil and gas projects were delivered on time, and played a key role in developing one of the ten Asset Stewardship Expectations: SE-05 Robust Project Delivery. The industry-led EOR task force contributed to OGA’s ‘Polymer Enhanced Oil Recovery – Industry Lessons Learned’ publication, in which a number of operators share their own experience.
To complement its samples and information powers under section 34 of the Act, OGA published Guidance on Information and Samples Plans (ISPs) and on Information and Samples Coordinators (ISCs), whereby operators and licensees are to appoint an ISC, and prepare ISPs to ensure the proper transfer of relevant data in connection with licence events such as transfers of interests. OGA also held a consultation, which closed in August, on new regulations dealing with retention of data by operators and licensees, and disclosure of data received by OGA under its powers. These rules have the potential to add significantly to the burdens on industry, which requested a number of significant changes to the draft. At the time of writing OGA’s response to the consultation was not yet available.
OGA’s aim is to make as much data openly available as possible. It has undertaken several significant data releases, including the publication of a suite of seismic and subsurface data in relation to undeveloped discoveries, well data on thousands of wells, UKCS-wide multi-satellite gravity data and regional geological maps covering the Central North Sea and Moray Firth as well as the 21st Century Exploration Roadmap. Its latest consultation proposes the creation of a National Data Repository of geological and geophysical data, to be hosted initially by Common Data Access Limited (CDA), which is a subsidiary of Oil & Gas UK, but paid for out of the OGA levy rather than CDA’s current subscription model.
OGA in October updated its Statutory Notice on Meetings whereby it must be notified of and can participate and attend in industry meetings – the notice ensures that the statutory notification requirements are not over-burdensome on either industry or OGA, by significantly limiting the meetings which must be notified, and the update reflects OGA’s developing priorities.
Working Together
OGA in July published ‘Guidance on the Development and Use of Area Plans’, which are plans developed between OGA and industry designed to maximise economic recovery in a particular geographical area. The Area Plan Guidance sets out a prescribed form for the Area Plans and details the activities to be carried out and the potential level of OGA involvement at each of the ‘Initiate’, ‘Work’, and ‘Execute’ phases. Area plans will require significant collaboration between licensees and operators in the areas to which they relate. Collaboration is a key theme of MER UK and is the focus of one of the Asset Stewardship Expectations. In April, OGA published its Implementation Guide and an associated Collaboration Behaviour Quantification Tool, which is intended to assist industry in understanding how OGA will implement and assess progress.
The Infrastructure Code of Practice, which governs the process for negotiating access to third party infrastructure, was updated in 2017 to reflect the introduction of MER UK principles.
Decommissioning
OGA’s ‘UKCS Decommissioning 2017 Cost Estimate Report’, released in June, provided OGA’s P50 estimate of the cost of decommissioning oil and gas assets on the UKCS, currently £59.7billion. Its stated goal is to reduce this figure by 35%, focusing its cost reduction efforts on well P&A, topsides removal and post-COP operating costs. It has already launched an appeal for operators to take part in a well P&A optimisation programme. At the time of writing, the industry is keenly awaiting the Chancellor’s Autumn Statement to see whether proposals for transfer of tax history will be taken forward, as these may assist the development of the late life asset management sector. We also continue to await updated BEIS Decommissioning Guidelines which were initially expected to be published in the Spring.
Sanctions
During its initial months in full operation, OGA appears to have preferred to encourage, persuade and cajole industry to implement the detailed requirements that it considers necessary to reach its goal. It is also now clear, however that OGA will not hesitate to push (by way of sanctions if necessary) if companies do not willingly move far or fast enough in the right direction.
OGA has reported that ‘the case review process is working well and is proving effective in resolving cases before sanctions are considered.’ However, in at least one case it is understood the formal sanctions process has been initiated, although this will not necessarily lead to a sanction being imposed.
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