The OGA continues to develop its guidance and approach to regulating the UK oil & gas industry. This update summarises developments in five areas – regulatory review, energy transition, digital, project delivery and getting deals done. The full April 2020 Update Brochure can be accessed here and a list of the topics addressed by the OGA since our last update, together with links to access the relevant releases, can be found at the end of this article.
On 9 October 2019, the OGA launched its first Thematic Review, which is aimed at assessing perceived current or emerging risks to the industry, rather than being focussed on a particular issue, field or area. With one eye on the industry’s ‘social licence to operate’, the OGA’s first thematic review was intended to improve levels of compliance with regulatory obligations by identifying potential mitigations such as better guidance, better processes or more education.
Questions were asked in areas relating to licences and consents, including statutory notifications of meetings; well operations and notifications system; flaring, venting and production consents; data reporting requirements; and pipeline works authorisations and associated consents
The outcomes from analysis of the responses will be published in a report expected in the first half of 2020, which the OGA hopes will in turn increase compliance and improve communication between OGA and industry when it comes to issues of compliance.
The Energy Transition
The OGA has recognised its crucial role in supporting the UK’s progression towards a lower carbon economy and the need to respond to the energy transition challenge. In line with the UK’s new global statutory target to reduce carbon emissions to net zero by 2050, the OGA has recognised that "if the industry wants to survive and contribute to the energy transition it has to adapt" in light of the increased regulatory obligations upon the UK to reduce carbon emissions even further.
A formal consultation on the adaptation of the MER strategy in light of increasing commitments to carbon-zero futures is expected in Spring 2020.
On 19 December 2019, the OGA published its Digital Strategy for 2020-2025. The Digital Strategy outlines the OGA’s commitment to digital services for the UK’s oil and gas industry. It intends to promote, deliver and influence digital excellence through digitalisation to support the Maximising Economic Recovery UK Strategy and the energy transition.
According to the Digital Strategy, over the next five years, the OGA will:
- Further build and embed a culture of digital excellence across the industry;
- Advance and improve public trust in open and transparent quality data and platforms;
- Unlock and exploit data value through advanced analytical tools; and
- Collaborate with key stakeholders so services continue to improve.
The OGA published its 2018 UKCS Projects Insights Report (the “Report”) on 1 November 2019. The Report outlines the performance of capital projects on the UKCS in 2018 and compares it to past performance (2011-2016). It also gives an insight into the future project portfolio.
The Report states that projects performance has improved in 2018 and that new projects sanctioned in 2018 delivered high value. The Report concludes that although activity outlook is robust, project approval slippage remains a concern.
- 60% of projects were delivered on time compared with 25% pre-2017;
- Overspend on estimated budgets reduced from an average of 35% pre-2017 to 10% in 2018;
- Average Unit Development Cost (“UDC”) reduced by nearly 60% from pre-2017 to £8/boe in 2018; and
- £3.9 billion CAPEX has been approved for 20 recently consented developments, with 60 projects currently being worked on by operators over the next 5 years.
Getting Deals Done
Mergers and acquisitions are now relatively commonplace in the UKCS. However, anecdotally the length of time that some third parties take to provide consent to licence assignments has been increasing, with a perceived negative impact on asset sales. The OGA raised these concerns with OGUK in the course of 2018 and, as a result, a working group was set up to address these “partner drag” issues. Subsequently, OGUK’s “Transaction Best Practice guidance” was published, which collates industry views on what constitutes reasonable and unreasonable behaviour in the context of asset transfers.
Publications (to end March 2020)