In our previous Law Now we considered what might be expected from OGA in the early months of 2017. As we near the end of Q1 2017, we reflect upon the regulator’s recent actions and announcements and consider how they correspond to the framework of OGA priorities and objectives.
“Lessons Learned” and the Asset Stewardship Strategy
Last week, OGA published a thirty-page report examining major oil and gas projects undertaken on the UKCS over the last five years: “The Lessons Learned from UKCS Oil and Gas Projects 2011-2016”. From its inception, OGA has emphasised the need for greater understanding of work in the UKCS, in order to identify and share good practice and identify where there is room for improvement. In seeking to define what good asset stewardship is, the report promotes the objectives contained in OGA’s Asset Stewardship Strategy (for more on Asset Stewardship, see our previous Law Now).
As background to the report, OGA considered 58 major projects carried out between 2011 and 2016 and summarised its principal findings as follows:
- Since 2011, on average fewer than 25% of oil and gas projects were delivered on time, with projects averaging 10 months’ delay.
- Projects delivered were on average around 35% over budget relative to estimates made in Field Development Plans (“FDPs”).
- Levels of capital expenditure were at an all-time high, averaging just over £12 billion annual Money of the Day (“MoD”) since 2011. This compares to £3-6 billion MoD per annum through the last decade.
In addition, the report highlights several “lessons learned”. Split into five categories, these learnings are the outcome of a series of OGA-hosted events participated in by several operators and contractors. The lessons themselves played a key role in developing one of the ten Asset Stewardship Expectations: SE-05. This Expectation focuses on robust project delivery and imposes upon operators an expectation to deliver major capital projects as per the cost and schedule commitments made at the time of FDP approval.
PPRS and the Information Management Strategy
In late February 2017, OGA announced its intention to launch a refreshed Petroleum Production Reporting System (“PPRS”) during Q2 2017. The updated programme will replace the current “PPRS 2000” and is designed to improve the system’s functionality and capability. Currently, monthly data from onshore and offshore fields and terminals is submitted by the operator via email to OGA. The data is then loaded onto PPRS and placed in the public domain on OGA’s website after three months. In contrast, the new system will allow operators to load the data directly into the application, vastly improving the efficiency of the process. Standard data validation rules will also feature, along with enhanced tools for OGA to monitor data quality and submission, and a new interface for operators.
In revising the data programme, OGA looks to deliver upon several of its key objectives. The regulator takes the view that access to comprehensive, good quality data is critical to the success of the MER UK Strategy. Not only is this emphasised generally in the Information Management Strategy, but revision to PPRS is also a specified objective of the associated Delivery Programme (at paragraph 3.6.3). Notably, the new PPRS system will also input into OGA’s Asset Stewardship model, combining OGA’s information and data priorities with its asset stewardship ambitions.
Well P&A Optimisation Programme and the Decommissioning Strategy
OGA is currently in the process of searching for operators to voluntarily participate in a multi-operator well plug and abandonment (“P&A”) optimisation programme. Those selected for the programme will work alongside OGA to examine the opportunity for a collaborative well P&A programme to be executed in 2018/19.
The pilot programme is intended to demonstrate the cost savings which can be achieved through collaborative working. It is hoped this will stimulate work-sharing campaigns and encourage parties to adopt improved execution and contracting models. Such an emphasis on cost-saving directly aligns with the priorities of OGA’s Decommissioning Strategy. Identified as a primary theme of focus by the MER UK Decommissioning Board, “cost certainty and reduction” forms a core branch of OGA’s approach in this area.
These recent developments represent steps taken by OGA to implement several of the MER UK-supporting targets that it has set out and provide real world examples of the approach that the OGA seeks to encourage in terms of identifying, sharing and promoting good practice and using data, information sharing and technology to drive collaboration and cost reduction.
These are, however, only a small part of the OGA’s long term project to ensure MER UK. Several actions identified in our previous Law Now remain outstanding. In particular, OGA responses to several consultations are awaited:
- The consultation on proposed Financial Penalty Guidance closed on 3 November 2016 - OGA intended to publish a statement by 26 January 2017 but had not yet done so at the time of writing.
- The consultation on proposed new OGA fees and amendment of the methodology to calculate the levy closed on 5 December 2016 (see our previous Law Now) - no date has yet been provided for OGA’s response, although that response was anticipated within 12 weeks of the consultation’s close.
- The consultation on proposals to introduce the ‘Innovate Licence’ and amend the model clauses closed on 6 January (see our previous Law Now) - no date has yet been provided for OGA’s response, although that response was anticipated within 12 weeks of the consultation’s close.
A further draft consultation is expected soon on new regulations for the retention and publication of information and samples by OGA and industry (for more on OGA’s information and samples powers, see our previous Law Now). We also anticipate the issuing of OGA’s first regional or area plans in the course of this year.