In June 2013 the UK government commissioned an independent review of offshore oil and gas recovery – led by industry stalwart Sir Ian Wood – with a remit to engage with companies holding interests in the UKCS, along with institutions such as HM Treasury, the Scottish government and regulators from the USA, Norway and Australia. The resulting report, published in February, suggests that the UKCS could deliver an additional 3–4 Bbo over the next 20 years, worth about £200 billion to the economy.
The report recommends that industry works closely with government to implement the UK Oil and Gas Industrial Strategy, and to develop the strategy for maximising the economic recovery from the UK Continental Shelf, by establishing a new sector regulator, focusing on six key areas:
- Exploration Strategy: ensure that economically recoverable resources are fully explored, appraised and exploited in a timely manner, by an appropriately tailored licensing regime and by encouraging data sharing.
- Asset Stewardship Strategy: ensure operators account for the proper stewardship of their assets, with consideration to adjacent resources.
- Regional Development Strategy: development on a regional, rather than a field basis, with the aim of maximizing economic recovery from clusters of fields. License holders should make their infrastructure facilities available to third parties.
- Infrastructure Strategy: prolong life of the existing infrastructure and achieve investment in new key infrastructure.
- Technology Strategy: ensure existing technologies are deployed to their full effect and that relevant new technologies are developed to maximize recovery.
- Decommissioning Strategy: achieve maximum economic extension of field life and ensure key assets are not decommissioned prematurely.
It is hoped that by implementing these strategies, operators will avoid unnecessary costs, delays and complexity in their dealings with one another. Key to the process is the need for industry to make available suitably qualified and experienced senior personnel.
Commenting on the present regulatory function, Sir Ian said it, “…has halved in size over the last 20 years and now lacks the broader capability and resources to perform the much more demanding stewardship role that is required…The (new) proposals and limited new powers are much more about stronger and better stewardship …as opposed to more regulation...”.
The UK government has accepted the key recommendations and Sir Ian is to chair an Interim Advisory Panel on setting up the new regulator. A CEO could be in place by the summer of 2014 and stakeholders are being invited to participate in the process.
Industry body, Oil & Gas UK, welcomed the report. Chief Executive Malcolm Webb said, “...We strongly welcome the proposal for a new arm’s length regulator... The report is a game changer.”
It promises to be an interesting few months ahead as the new regulator emerges, the commitment of the industry to bear the costs is tested and the referendum on Scottish independence nears its climax – the outcome of which may provide the regulator with its first and potentially biggest hurdle.