It is six months since the Oil and Gas Authority (OGA) published Call to Action in response to the commission from the Secretary of State for Energy and Climate Change. The report identified the key risks facing the UK oil and gas industry following the sharp decline in global oil prices, the required action from industry, government and the OGA, and early priorities for the new regulator.
In February 2015, a barrel of Brent crude was priced at $60. As this report went to press in early September 2015, the price had fallen to below $50, creating an even more challenging economic environment for companies involved on the UK Continental Shelf (UKCS), where unit operating costs have become and remain higher than many other basins around the world.
As a result, companies have had to make some tough decisions to reduce operating costs, improve efficiency and remain competitive. Regrettably, this has led to the loss of around 5,500 jobs since late 2014 and the OGA, working with other groups such as the Scottish Energy Jobs Taskforce, continues to encourage companies to consider all possible alternatives to redundancy, and retain capability needed for the future.
These difficult conditions have underlined the need for structural change in our industry and, over the past six months, have galvanised collaboration and action from industry, government and the OGA, of the sort recommended by Sir Ian Wood in his 2014 review of the UKCS.
Our Call to Action report, which identified clear actions for the OGA and for industry, has helped to focus these collective efforts on the most urgent priorities and led to a number of positive outcomes that have made a real difference as we work together to protect the future of our oil and gas sector.
While the level of new exploration activity remains low, we have made rapid progress with the UK Government-funded seismic programme. The £1.3 billion package of new fiscal measures announced by HM Treasury in March is securing investment in new development projects. And operators are beginning to find new ways to work together, change behaviours and, as a result, remove barriers that have existed for decades.
We should be in no doubt about the scale of the challenge ahead but it is important that we recognise the progress that has been made over the past six months and remain focused on the things that matter most as we look forward. This short report is intended to do just that.
It describes what we’ve done to establish the OGA as an independent regulator, the new regulatory powers included in the Energy Bill and how the MER UK Strategy will shape the future operating environment on the UKCS. It provides an update on the actions identified in our original report and highlights some of the positive work that has since been done, as well as areas of future focus.
Our oil and gas industry supports around 375,000 jobs, provides secure energy for our homes and businesses, and generates billions of pounds for our economy every year, at home and through exports overseas. Government, industry and the OGA must continue to work together to increase the competitiveness of this vital sector and maintain the significant benefits it brings to the UK.
Andy Samuel is the chief executive of the Oil and Gas Authority. For more from Samuel and report findings go here.
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