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PROTECTIVE MARKING(as appropriate)
Turning commitment into actionOil and Gas UK Conference
17 June 2015
PROTECTIVE MARKING(as appropriate)
Turning commitment into action
Introduction
• Current context
• Building the OGA
• Focused delivery
• Culture & behaviours
• Future action
PROTECTIVE MARKING(as appropriate)
Jan 2011 June 2015
UKCS challenges
E&P decline Increased costs Sharp drop in price
Brent $/barrel
Economic challenges intensified since the Wood Review
All-time low for exploration
and appraisal
Existential crisis on costs,
efficiency and margins
Significant falls in
investment predicted
PROTECTIVE MARKING(as appropriate)Focusing on priorities
• Licence offshore oil & gas
• Licence onshore oil & gas
• Licence CCS
• Industry culture
• Commercial behaviour
• Greater collaboration
• Investment in UKCS
• Value creation
• Industry development
Role of the OGA in maximising economic recovery
Reg
ula
te
Infl
ue
nc
e
Pro
mo
te
Prize of additional 3-4 billion barrels Highly valuable industry
Sector strategies
Revitalise
exploration
Four priorities
Rapidly
implementTrusted advisor
to Treasury
Urgent action
from industry
Le
ad
ers
hip
, C
ultu
re
& b
eh
avio
ur
PROTECTIVE MARKING(as appropriate)Building the OGA
DECC
EDU
LED
Historically From 1 April c. Summer 2016
OGAExecutive Agency
(Civil Service)
DECC
OGA
Government
Company
DECC
Fra
me
wo
rk
Do
cu
me
nt
En
erg
y B
ill
20
15
Rapid progress on all fronts
Leg
isla
tio
n
Q3 ‘15 Mid ‘16Feb
Commission
Response
Executive
Agency
Leadership
complete
Critical mass to
deliver
Government
Company
Energy Act
1 April
Introduce
levy
MER UK
Consultation
Org
an
isati
on
Energy Bill & Levy Preparation
PROTECTIVE MARKING(as appropriate)MER UK Strategy
Delivering the maximum overall value from the
economic reserves in the UKCS
• Maximise net value not just volume
• Investment should add net value overall UK
• May oblige companies to redistribute value
• Companies to see satisfactory expected
commercial return on investment
• Balance extracting all economic reserves
and achieving MER across the UK
MER UK Definition
MER UK Principles
Combining new regulatory powers with a more proactive approach
Sanctions Rewards
Striking the right balance
PROTECTIVE MARKING(as appropriate)Rapid recruitment
Layer light structure with clear accountabilities – 179 max headcount
Chief Executive
Exploration &
Production
Policy,
Performance &
Economics
HR &
Change
Chief Financial
Officer
Technology, Supply
Chain &
Decommissioning
Licensing &
Legal
Exploration &
New Ventures
Central North
Sea
NNS & West of
Shetland
SNS &
Morecambe Bay
Angela Seeney Simon Toole Gunther Newcombe Hedvig Ljungerud Stuart Payne John Ogden
Andy Samuel
Brenda Wyllie Scott Robertson Eric Marston Nick Richardson
Aberdeen
London
A
L
A
A L LLA A
A A A A
PROTECTIVE MARKING(as appropriate)Experienced leadership
A strong and effective regulator
PROTECTIVE MARKING(as appropriate)
Urgent action underway to avoid domino effect
Protecting critical infrastructure
PROTECTIVE MARKING(as appropriate)Driving investment
£20m for new
geophysical surveys
Confirmation of new basin-
wide investment allowance
Petroleum revenue tax
reduced from 50% to 35%
Supplementary corporation tax
reduced from 30% to 20%
Urgent need for industry to reduce costs and improve efficiency
Principles:
• overall tax burden fall
• global competitiveness
• wider benefits / TVA
Forward work:
• Options to revitalise exploration
• Infrastructure, decom and PRT
Driving Investment Plan
PROTECTIVE MARKING(as appropriate)
Significant need for improvement
Asset stewardship
0% 20% 40% 60% 80% 100%
• Top 20 oil and gas producers
2014 performance and 2015 plans
• Constructive - high level of transparency
and growing cooperation
• Moving forward with far greater
transparency on data, performance and
improvement plans
• OGA now working with OGUK
benchmarking ahead of detailed sessions
with operators
Production efficiency performance Leaders engaged
PILOT
Target
PROTECTIVE MARKING(as appropriate)Revitalising exploration
21st Century Exploration Road Map
• PILOT Exploration Task Force initiative
• Potential new and neglected plays
• Well results, exploration success rates, yet-to-find estimates
Palaeozoic
study
• OGA/industry funded Palaeozoic evaluation
• Understand risk and improve stewardship
Post well
analyses
• Detailed analysis of c.100 wells
• Improve data access & quality of interpretation
Data and
technology
• Improved data management and access
• 3D seismic technology showcase
Integrated solutions required
28th Round licences
Other licences
Mid North
Sea High• 15,000 km of new regional 2D seismic lines
• Rockall Trough and Mid North Sea
• Preparation for a licence round next year
Root cause
analysis
Government
funded seismic
• Data, quality of interpretation, regulation
• Infrastructure, fiscal, capital, cost efficiency
Strategic
Licensing
Review
• Review of the UK licensing strategy
• Improve access to prospective acreage
• Adequate time to execute & firmer oversight
PROTECTIVE MARKING(as appropriate)Decommissioning
Who does what
DE
CC
OG
A
Area Teams
• Cessation of production
• Regional approach
• MER UK compliant
Decom Team
• Technology, costs, efficiencies
• Learning and cooperation
• Optimal models & plans
DECC Team
• Funding and security
• Programme approval
• Regulatory compliance
• Environment risk/mitigation
A huge prize - cost and efficiency is key
Efficiency opportunities
Management of asset late life: Pre-invest in decom readiness
Assets in the right hands: Alleviate obstacles to M&A
Early engagement: efficient execution of regulatory requirements
Industry cooperation: benefits from scale; joint campaigns eg SNS
Standardisation: equipment sharing, efficiencies & reduce risks
Share learnings: Companies, regulators & other basins
Technology: P&A, topsides removal, pipeline inspections
Supply chain: capacity planning, incentives, global export
PROTECTIVE MARKING(as appropriate)Create the right conditions
Creating a hub for capital investment by anchoring the supply chain
Create right
conditionsLeadershipBehaviours workshop with
Scottish Enterprise
Investment
OGA at Offshore
Technology Conference
Aberdeen City
Region Deal
Focus
Simplify landscape &
accountability
High impact priorities
Technology
OGA co-chair Technology
Leadership Board
Skills
University & college
partnerships
Infrastructure
Energy Technology
Institute
Transport and support
services
PROTECTIVE MARKING(as appropriate)
We all need to lead the change
Culture and behaviours
PROTECTIVE MARKING(as appropriate)OGA prioritisation
• 4 recommendations
• 6 strategies & 29 actions
• Legislation & governance
• 25 actions for OGA
• 7 industry expectations
• Highly visible
We all need to focus our efforts on the things that matter
• Urgent action
• Risks and opportunities
• Value at stake
PROTECTIVE MARKING(as appropriate)
Turning commitment into the right action
Looking ahead
• Complete Board recruitment
• Next wave of recruitment
• Finalise Energy Bill
• MER UK consultation
• Call to Action update Sept
• Introduce levy in Oct
• Move to new HQ Nov
Building the OGA OGA in action
• Opportunity matrix
• Driving investment plan
• Exploration priorities
• Seismic project
• Decom collaboration
• Wood Review & Call to Action
• Sector strategies
Industry in action
• Protect critical infrastructure
• Commercial behaviours
• Asset stewardship
• Cost and efficiency
• Decom efficiency
• Simplify landscape
• Retain and develop skills