Over the last few weeks the Oil and Gas Authority (“OGA”) has published significant further guidance on how it intends to achieve its obligations under MER UK. To date, this consists of seven Strategies, three Delivery Programmes, and additional ‘Asset Stewardship Expectations’ – more guidance is expected to follow. This article seeks to summarise the available information and clarify its intended objectives and priorities.

Recap

Enacted in May this year, the Energy Act 2016 requires OGA to prepare strategies to enable the “principal objective” (as defined in the Petroleum Act 1998, amended by the Infrastructure Act 2015) to be met, and sets out the powers OGA may exercise in seeking to achieve that aim. The goal of maximising economic recovery of UK petroleum has since formed the driving force behind the new regulator. In order to facilitate OGA’s achievement of the objective, the Secretary of State published the MER UK Strategy in March 2016. The Strategy defines the “central obligation”, requiring relevant persons to take steps to ensure that the maximum value of economically recoverable petroleum is recovered.

Putting some flesh on the bones of this overarching policy OGA has now published seven ‘sub-strategies’, each designed to facilitate supporting obligations and contribute to the ultimate goal of MER UK:

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Supply Chain Strategy (published 25 October 2016) 

Aim: to encourage, influence and promote MER UK and to generate additional value for the supply chain.Supply Chain Strategy (published 25 October 2016)

Priorities: maximise the economic potential from the UKCS; anchor the service sector in the UK; and double its share of the accessible international market from 3.7% to 7.4% by 2035.

Accompanying materials: the ‘Supply Chain Delivery Programme’ describes in more detail how and when the strategy’s focus areas will be delivered. It is primarily focused on the next 18 months.

Awaited materials: as part of the implementation of this Strategy, OGA will publish information on upcoming projects and activities and will introduce Supply Chain Action Plans as part of the Asset Stewardship process.

Asset Stewardship Strategy (published 25 October 2016)

Aim: to clearly define what ‘good asset stewardship’ is and how OGA’s enhanced asset stewardship process will work.

Priorities: to set out Stewardship Expectations for industry (details published separately, see below); rationalise nine industry surveys into a new, single, annual UKCS Stewardship Survey; benchmark performance on the basis of OGA’s UKCS data repository; and conduct stewardship reviews with operators and licensees based on information gathered, to try to share best practice.

Accompanying materials: the ‘Asset Stewardship Expectations’ sets out ten expectations for improving industry performance. These cover: joint venture hub strategy; exploration and appraisal subsurface work programmes; optimum use of subsurface data; licence activity, decision points and milestones; robust project delivery; production optimisation; information management; technology plans; collaboration; and planning for decommissioning.

Awaited materials: a ‘Delivery Programme’ is expected.

For more information on this Strategy and the Expectations, see our previous Law Now.

Decommissioning Strategy (published 30 June 2016)

Aim: to achieve the maximum economic extension of field life and ensure that decommissioning is executed in a safe, environmentally sound and cost effective manner.

Priorities: cost certainty and reduction, carried out in a technically competent, safe and environmentally responsible manner; decommissioning delivery capability in terms of supply chain expertise and capacity, effectively supported by appropriate business models, contracting arrangements and industry alignment; and decommissioning scope, guidance and stakeholder engagement.

Accompanying materials: the ‘Decommissioning Delivery Programme’ describes in more detail how and when near-term priority areas in decommissioning will be delivered. The three main priority areas are expanded upon, together with three additional programme elements: the Decommissioning Delivery Programme consultation; the Well Plug and Abandon optimisation programme; and industry engagement.

Awaited materials: detailed asset expectation guidance relating to decommissioning is expected this month. In addition, the Delivery Programme schedules a consultation for the second quarter of 2017, and contains further plans to develop and deliver a detailed overall UKCS decommissioning cost estimate, publish documentation on the current late life and decommissioning supply chain capabilities, and publish OGA’s policy on suspended well consent.

For more information on this Strategy, see our previous Law Now.

Exploration Strategy (published 24 October 2016)

Aim: to maximise the economic recovery of hydrocarbons from the UKCS through safe and cost effective E&A activities.

Priorities: promote exploration opportunities in the UK through both regional and targeted approaches; regulate the optimal use of the UK’s acreage through licensing activities and stewardship; and subsurface technical assurance and portfolio management in order to improve exploration and ensure prospective resources are efficiently and fully
exploited.

Accompanying materials: none.

Awaited materials: a ‘Delivery Programme’ is expected.

Enhanced Oil Recovery (“EOR”) Strategy (published 22 July 2016)

Aim: to encourage successful EOR which may significantly increase the volume of recovery, extend field life, support job provision in the supply chain, help stimulate field redevelopments and defer decommissioning activities.

Priorities: drive economic development of 250 mmboe incremental reserves primarily through polymer EOR over the next decade; support existing EOR projects to ensure readiness for future projects; demonstrate a proven offshore operation of low salinity EOR and progress further opportunities by encouraging evaluations for all new projects.

Accompanying materials: none.

Awaited materials: a ‘Delivery Programme’ is expected and an ‘EOR Communication Plan’ is to be developed.

Information Management Strategy (published 24 October 2016)

Aim: to improve information quality, coherence, consistency, transparency and help to unlock UKCS potential.

Priorities: analysis, insight and understanding; data regulation; data quality management; data management authority and collaborative working; unified data storage and access; and enhanced operational data management.

Accompanying materials: the ‘Information Management Delivery Programme’ covers 2016-2020 and sets out the actions, objectives, inputs, responsibilities, deliverables and timelines for each of the six key themes of the Strategy.

Awaited materials: a consultation document on Information Management is expected and it is anticipated that OGA will make proposals to the Department for Business, Energy and Industrial Strategy on new regulations and guidance for the retention and publication of information and samples by OGA and industry.

Technology Strategy (published 20 September 2016)

Aim: to revitalise exploration, enable the development of marginal discoveries, reduce costs of field developments, operations and decommissioning, and to grow exports of the UK-based supply chain.

Priorities: keeping technology prospects of the UK oil and gas industry aligned and focused on the areas of highest value for the UKCS; supporting progress in developing, testing and deploying technologies, working closely with the new Oil and Gas Technology Centre (“OGTC”); and overseeing efforts by the industry in technology and innovation
via the direct engagement of licence holders on Technology Plans, performance benchmarking, knowledge sharing and technology deployment campaigns.

Accompanying materials: none.

Awaited materials: a ‘Delivery Programme’ is expected.