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Presentation title - edit in Header and Footer

Midst of Despair or Time of Opportunity

Bill Cattanach

November 2015

PROTECTIVE MARKING(as appropriate)Highlighting the significance of the sector

• Offshore Oil & Gas Industry started production nearly 50 years ago

• 470 installations and 35,000 kms of pipelines

• Supports 375,000 jobs• It is one of the UK’s greatest

post war Industrial successes• Industry contributes significant

value to UK Treasury • Has produced over 44 billion

BOE – Potential for further 20+ • UK still more than 50% self

sufficient in oil and gas

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UKCS challenges

E&P decline Increased costs Sharp drop in price

Jan 2011 August 2015

Brent $/barrel

Economic challenges intensified since the Wood Review

All-time low for exploration and appraisal

Existential crisis on costs, efficiency and margins

Slow down in investment; pressure on profitability

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About the OGA

Priorities

Rapidly implement

Trusted advisor to Treasury

Industry to urgently take

action

Lead

ersh

ip, C

ultu

re &

be

havi

our

• New independent regulator

• Effective stewardship resources

• New powers, better resourced and funded

• Catalyst for change and facilitator of action

• Encouraging collaboration

Creating the OGA

The OGA has a key role to play in driving action

Role of the OGA

Licence offshore oil & gas

Licence onshore oil & gas

Licence carbon capture & storage

Industry culture

Commercial behaviour

Greater collaboration

Investment in UKCS

Value creation

Industry development

PROTECTIVE MARKING(as appropriate)Decom, supply chain & technology

Ongoing recruitment and collaboration attracting significant interest

Technology, Decommissioning &

Supply Chain

Head of Decommissioning

Angela Seeney

Head of Technology

Head of Supply Chain

Chief Information Officer

• Multi-disciplinary, experienced & diverse

• Recruitment for 13 roles in hand 24 in place

• Early stage planning, campaigns and roadmaps

• Alignment across the value chain & industry

• Strengthening governance, data & processes

Developing the organisation Collaborating

• Across the TDS team and OGA

• With academia, industry & trade associations

• Across relevant government departments

• With key stakeholders & other regulators

• Other investors eg venture capitalists

Bill Cattanach TBCCarlo ProcacciniTBC

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Core work area boards

Purpose Deliver tangible benefits in support of MER UK and maximising UK value from the oil and gas industry as a whole

Objectives1. Develop a clear strategy and five year plan 2. Create leadership alignment and leverage tripartite action 3. Deliver tangible and quantifiable results

Core work areas

Exploration

Technology

Asset Stewardship

Decommissioning

Regional development & infrastructure

Supply chain & exports

Cost & Efficiency

Skills

Phil Kirk, Chrysaor Ray Riddoch, Nexen Paul Goodfellow, Shell John Pearson, AMEC FW

Paul White, GE Collette Cohen, Centrica Neil Sims, Expro Group TBC

1

5

2

6

3

7

4

8

Leadership Industry-led with tripartite support

Frequency Quarterly Support OGA/BIS/UKTI/OGUK

Gunther Newcombe Gunther Newcombe Gunther Newcombe Stephen Marcos-Jones

Angela Seeney Angela Seeney Angela Seeney TBC

Industry lead OGA | BIS/UKTI | OGUK lead

Focused priorities and action

PROTECTIVE MARKING(as appropriate)Supply Chain & Exports Board

Collaboration is key to success

OGAChair & Secretariat

Industry Lead

2 SE/SG

CONSULTANTPOOL

1 ACADEMIA

1 BIS

• Expro Neil Sims • Angela Seeney (Verity Burrows)• Bill Cattanach • Sylvia Buchan

5 OperatorMembers

10 Supply Chain

1 UKTI 1 OGUK

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Promote the supply chain

• World-class supply chain

• £35 billion annual turnover

• 375,000 highly-skilled jobs

Export growth OGA approach

• Service companies vital role

• Deliver efficiency solutions

• Increase competitiveness

Increasing efficiency

• Alliances and campaigns

• Improve project contractors

• Encourage standardisation

Promote a strong supply chain that competes globally

• Five-year strategy and plan

• Sector-based activity approach

• Create visibility of supply chain opportunities

• Work with UKTI and SDI on overseas opportunities

• Support development of workforce expertise

• Working with industry to give supply chain a voice

Clear strategy and prioritiesProject Pathfinder: creating visibility of

opportunities

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Support the supply chain

• Increased visibility of the market

• Address Permafrost –new contract models

• Give supply chain a louder voice

Opportunities

Campaigns• Encouraging operators to work together

• Economies of scale; increased efficiency

• Standardisation; sharing best practice

Driving up to 40% efficiency improvement

Alliancing• Maintain competitive fabrication industry

• Develop new contracting model

• Rebuilding large fabrication capability

Rystad Report

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Decommissioning collaboration

Government

DE

CC

OG

A

OGA E&P Teams

• Cessation of production

• Regional approach

• MER UK compliant

OGA DST Team

• Costs, efficiencies, technologies

• Learning and cooperation

• Optimal models and plans

• Reduce Treasury decom burden

DECC Team

• Funding and security

• Programme approval

• Regulatory compliance

• Environment risk/mitigation

A huge prize: cost and efficiency is key

Collaboration with industry

Right assets; right hands: Treasury led Late Life Extension workshops

Industry cooperation: Benefits from scale; joint campaigns

Standardisation: Equipment sharing, efficiencies & reduce risks

Technology: P&A, current ITF call for 3 key enabling technologies

Supply chain: Develop local/global market, capacity planning, incentives

SNS well plugging and abandonment initiative

Collaboration on 500 wells with up to 40% cost savings

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Key business challenges that require pan-industry collaboration

Unlock up to 1bn additional resources and $20bn investment through radical reduction in cost and deployment of innovative technologies

Small Pool Development

Generate > £1 bn additional revenue through the radical reduction oftime dedicated to vessel inspection and managing corrosion under insulation

Champion: Total - Philippe GuysLead supplier: Amec FW - Andy Ewens, Support: OGIC - Ian Phillips

Champions: Gas - Centrica Colette Cohen, Oil - Enquest Neil McCulloch Lead supplier: GE - Paul White, Support: NSRI – Gordon Drummond

Integrity and inspection

Technology Themes

Champion: Shell – Paul GoodfellowLead supplier: Baker Hughes - Crawford AndersonSupport: ITF - Paddy O’Brien

Reduce well construction costs by 50% (time-to-depth and flat-time) to allow an extra c. 50 wells to be drilled per year

Well construction

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1% Improvement in PE delivers 30,000 BOPD

Initial OGA initiatives Production Efficiency

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

• Top 20 oil and gas producersperformance improvement plans

• Constructive approach with high level of transparency & cooperation

• Moving forward with far greater transparency on data, performance and improvement plans

• UK production up 10% last 6 months compared with 2014

Production ImprovingHistorical PE Performance

Pro

du

ctio

n E

ffic

ien

cy

Pro

du

ctio

n (

Mil

lio

n B

OE

PD

)

PE Target

Current Top 20 PE Performance

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OGA Monthly Performance Pack 2015

Geophysical Programme

40,000km of new and legacy data

• The Rockall Trough area is under-explored with just 12 exploration wells since 1980

• A proven working petroleum system with Benbecula discovery in 2000

• Most of the seismic data are pre-1998

Rockall Trough

• New advances in seismic acquisition broadband technology, longer streamer length and advances in processing technology can now improve deeper imaging

• Plan to also acquire data close to shore to transfer critical onshore knowledge

Mid-North Sea High

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Future can be brightUKCS STILL

HOLDS UP TO

20 BILLION

BOE

• Portfolio of good new projects in pipeline • Considerable Brownfield potential• Over 300 undeveloped discoveries

OPENING UP NEW

FRONTIER

AREAS

•OGA working to stimulate new exploration with extensive seismic completed. •Licensing round in Spring when results are known

NEW APPROA

CHES TO

MANAGING THE BASIN

• New tripartite mechanism with industry, regulator and treasury working in partnership • Treasury have brought forward significant package of investment allowances • Industry working collectively on cost efficiency measures • Basin will need to adjust to lower oil price for foreseeable future