Firms which refuse to work together to maximise oil recovery from the North Sea could ultimately be stripped of their licences under plans contained within the Wood Review.
Sir Ian Wood is pushing for big changes in the way the industry goes about its business.
He wants a new body to govern the industry – one which is loaded with new powers.
The businessman said his review found evidence of companies cutting investment in infrastructure for short-term gain – and also of firms with a “predisposition” not to collaborate with others.
“Operators have brought many of the problems on themselves,” he says.
“Evidence given to the review clearly indicates the frustration and concern expressed by companies of all sizes on the negative impact of commercial behaviours.
“Whilst it is acknowledged that there are genuine technical difficulties that can impact negotiations, the frequency of failure to agree between and within consortia on key issues, including access to infrastructure and development of field clusters, is very damaging.”
He adds: “A lack of co-operation and collaboration across industry has increased costs, caused delays, and led to poorer recovery.
“The review has found more than 20 instances in the last three years where the inability of operators to agree terms for access to processing and transport infrastructure has led to significant delays or in some cases stranded assets.”
The current regulatory bodies have limited scope to step in. But Sir Ian is pushing for change and asking for major new dispute resolution powers.
They would see expert assessors intervening in rows, make recommendations to help resolve the issue.
Firms would then be given a year to iron out their differences.
Failure to act on the recommendations could end with a sanction – including formal warnings and even the loss of their licence.
The new body would also be able to include clauses within current and future licenses insisting that companies act in accordance with an overall industry strategy to maximise recovery.
This would include putting it in writing that firms must work together to develop regional clusters.
He also wants the new body to have powers to attend meetings held between consortiums exploring for and producing oil. This is common practice in Norway.
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