The Oil and Gas Authority (OGA) has spent £8million of cash raised through an industry levy in six months, according its latest financial report.
The firm, which released its accounts for the 2015-2016, year was funded by DECC for the six months of its financial period.
“In October 2015, following a public consultation led by DECC, an industry levy to fund the OGA was introduced with the annual levy apportioned between pre-production (11%) and in-production (89%) licence holders, based on an assessment of the costs that the OGA occurs in relation to each group,” its report read.
The executive agency levied £10million from the industry and spent £8.2million of it in the final six months of its financial year.
OGA’s total expenditure for the year was £24.6million.
The majority of its costs – 60% – were due to people, including £1.6million spent on temporary staff.
Staff costs totaled £9.1million. Non-executive chairman Sir Patrick Brown was paid $100,000 for 2.5 days a week. Chief executive Andy Samuel’s total pay and package was £335,000.
Sir Patrick Brown wrote in the report: “It is not unusual for a chairman to write about a successful year. I do not do that, because success in the case of the Oil and Gas Authority (OGA) is difficult to measure objectively, and the story of the first year is more complicated than that.
“Our first annual report sets out in some detail the evolution of the OGA, and rightly claims credit for reaching the present state of our activities after only
one year.
“From my point of view, the performance of the chief executive in melding the incoming employees from two cultures into a coherent and effective business was outstanding. And though it is formulaic for the chairman to thank the employees, I do so because there is no doubt that without their wholehearted commitment to making this new and unprecedented authority work we would not now be seeing Sir Ian Wood’s imaginative proposals operating in reality.”
The report highlighted some of the OGA’s successes, including issuing more than 800 operational consents and 400 well consents for companies operating in the UKCS.
The OGA also managed to save a firm £32million.
The report read: “We also introduced a new ‘impact assessment’ process to make sure that the most value-adding requests can be prioritised. For example, we fast-tracked a deposit consent application from a licensee, reducing the time from around eight weeks to just one week. If this work had not been fasttracked it could have delayed production and extended the project schedule. The licensee is estimated to have saved approximately £32 million as a result.”
The report also outlined a number of risks, which could potentially hinder OGA’s progress.
“The OGA faces many risks to the delivery of its ambition and strategic priorities in support of maximising the economic recovery of UK offshore oil and gas. The risks to which the OGA is exposed also reflect the scale, complexity and novel nature of its goals,” it said.
“Many of these risks relate directly to our work with the oil and gas industry; some concern the ongoing development of our organisation; and others to external factors outside the OGA’s direct control.”
Sustained low oil and gas prices, a domino effect caused by negative profitability and failure to achieve government company milestones are all considered risks.
“Sustained low oil and gas prices during the year caused some companies to cease trading,2 the report read.
“The risk of further similar situations remains very real.”
However, despite the risks and difficult oil price environment, Andy Samuel he was “encouraged” by his team’s performance.
The chief executive said: “I am encouraged by the progress the industry and the OGA made during 2015–16. In all of our work we have consulted and engaged widely with the industry, the UK and Scottish Governments, investors and civic society, and have benefited from high levels of constructive feedback and support.
“For example, the UK Government funding for new geophysical surveys in underexplored areas of the UKCS was very welcome and the fiscal changes introduced during the year make the UK fiscal regime for upstream oil and gas one of the most competitive in the world.”
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