MER UK and the Strategy

Simon Toole Licensing and Legal

Oil and Gas Authority

PROTECTIVE MARKING (as appropriate)

OGA Simon Toole

23 September 2015

PROTECTIVE MARKING (as appropriate) UKCS challenges

E&P decline Increased costs Sharp drop in price

Jan 2011 June 2015

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) 2014 Wood Review

Key recommendations

• Urgent need for enhanced stewardship

• New Maximising Economic Recovery strategy

• Commitment from industry to collaborate

• Stronger tripartite relationship between industry, government and regulator

• New independent regulator with additional powers and resources

Prize of additional 3-4 billion barrels 375,000 industry jobs to protect

Sector strategies

Revitalise exploration

PROTECTIVE MARKING (as appropriate) About the OGA

The OGA has a key role to play in driving action

Priorities

Rapidly implement

Trusted advisor to Treasury

Industry to urgently take

action

Le

ader

ship

, Cul

ture

&

beha

viou

r

Role of the OGA

• New independent regulator

• Effective stewardship resources

• New powers, better resourced and funded

• Catalyst for change and facilitator of action

• Encouraging collaboration

Creating the OGA

Regulate

• Licence offshore oil & gas • Licence onshore oil & gas • Licence carbon capture & storage

Influence

• Industry culture • Commercial behaviour • Greater collaboration

Promote

• Investment in UKCS • Value creation • Industry development

MER UK

PROTECTIVE MARKING (as appropriate)

Chief Executive

Exploration & Production

Policy, Performance & Economics

HR & Change Chief

Financial Officer

Technology, Decommissioning &

Supply Chain

Licensing & Legal

Angela Seeney Simon Toole Gunther Newcombe Hedvig Ljungerud Stuart Payne John Ogden

Andy Samuel

Leadership & accountability

Technology

Decommissioning

Supply Chain

IT, data & information

management

Licence Regulation

Dispute resolution & Sanctions

General Counsel

Onshore Licensing

Licence Stewardship

Integrated Area Teams

Exploration & New

Ventures

Metering

Gas Storage

Carbon Capture & Storage

Strategy & policy development

Communication &

external affairs

Performance, planning & reporting

Economics & fiscal

analysis

HR Leadership

Organisational Development

Support internal & industry cultural

change

Financial management &

control

Governance

Procurement

Accommodation

Manage the transition to GovCo

New organisation effective from 1 July 2015

PROTECTIVE MARKING (as appropriate) Who does what

Exploration & production including: Oil and gas policy including: Onshore, offshore & CCS licensing OGA

Field development plan approvals OGA

Cessation of production approvals OGA

Pipeline works authorisation OGA

Infrastructure OGA

Commercial matters & changes of control OGA

Flaring consents OGA

Metering OGA

Production outages OGA

Decom efficiency, costs, technology OGA

Legislation including the Energy Bill DECC – WRIT

Environment DECC - OGED

International relations DECC, OGA, FCO

Fiscal and taxation HMT & OGA trusted advisor

Decom programme approval, execution and monitoring DECC - OGED

Environmental management and inspection DECC - OGED

Health & Safety management HSE

Supply chain and business impact BIS & OGA

Decommissioning DECC - OGED, OGA, HMT

Key

OGA: Oil and Gas Authority OGED: Offshore Environment & Decommissioning Unit WRIT: Wood Review Implementation Team HMT: Her Majesty’s Treasury

Oil & gas parliamentary processes DECC – OGA sponsor team

PROTECTIVE MARKING (as appropriate) Infrastructure Act 2015

• Maximising Recovery of UK petroleum

• Substantial work already on what MERUK means

• Features in Strategies

• Features in Information

• Not defined further in legislation

• Wood Report Sector Strategies

Principal Objective MERUK Strategies

• Secondary legislation

• To secure the Principal Objective

• Licence holders, operators, infrastructure owners, decommissioners.

• These must act in accordance with strategies

• Annual Report to Parliament

PROTECTIVE MARKING (as appropriate) Energy Bill 2015

• Maximising Recovery of UK Petroleum

o Minimise public spending

o Security of supply

o Collaboration (with HMG and industry)

o Innovation (inc. Working practices)

o System of regulation (stable, investment)

OGA PRIORITIES Dispute Resolution

• Sir Ian’s intent

• Based on principal objective

• Party to dispute or OGA may initiate ( inc. For 3rd party)

• Triage, alternative resolution, courts

• Economically viable position

• Only procedural sanctions, but…

PROTECTIVE MARKING (as appropriate) Energy Bill 2015

• Fill the gaps

• Applicable to Strategy, licence, procedural

• Warnings, enforcement notice, financial penalty, operatorship, revocation

• Separation of roles within OGA, First Tier Tribunal appeal

Sanctions Information & Samples

• Any information related to the Principal objective – wide scope

• Regulation (SoS) making power for publication, availability

• Sample Plans - to prevent loss of data

• Coordinator within companies

PROTECTIVE MARKING (as appropriate) Energy Bill 2015

• Two or more Relevant Parties

• Principal Objective, Licence activities

• Duty to inform, provide materials

• No OGA vote or disclosure

• OGA Notices to focus attention

Meetings

PROTECTIVE MARKING (as appropriate) Draft 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)

Legal and Commercial workgroup

Legal and Commercial can Help