OGA: new Corporate Plan for 2019 - 2024 

United KingdomScotland

The Oil and Gas Authority (“OGA”) has published a new Corporate Plan setting out its priorities and plans for 2019 - 2024 (the “Plan”). The full Plan can be found here. The Plan looks back at performance since the publication of the OGA’s 2016 - 2021 Corporate Plan in March 2016 (the “2016 - 2021 Plan”). This reflection highlights numerous developments over the last few years, including: changes to the external environment; the delivery of three licensing rounds; the sanctioning and coming onstream of many new projects; improvements in operational efficiency; and industry collaboration. The Plan considers the OGA “way forward” framework under the headings of seven OGA themes and sets new priorities and KPIs for the next five years. In addition, the Plan describes budgets and forecasts for 2019 - 2024 and, finally, sets out the OGA project activities for 2019 - including delivery of the 32nd Offshore Licensing Round, which is due to open in the summer of this year and will focus on mature areas of the UKCS.

Looking back

The most recent 2016 - 2050 production projections, published in March this year, total an estimated 11.8 billion barrels of oil equivalent (“boe”). This equates to around a 45% increase (i.e. 3.9 billion boe) of additional production when compared with the same projections in 2015. The Plan attributes this, in part, to a stable rise in the price of oil since 2015. It also identifies several other factors as having aided the increase, such as: future exploration activities; recently sanctioned projects and discovered resources; the use of Enhanced Oil Recovery techniques; and the life extension of a number of fields.

The Plan seeks to align itself with Vision 2035. That Vision was co-created by the OGA with industry and sets out two ambitions:

  1. to add an additional three billion barrels of production by 2035; and
  2. to grow supply chain turnover by being a world leader in specific sub-sectors, doubling the UK’s share of service sector exports.

The Plan acknowledges that the OGA and industry still has some way to go if the Vision 2035 forecasts are to be delivered. In order to achieve this, the OGA states that the focus for industry should be on: drilling more wells; maturing more resources; and producing more reserves – all while maintaining efficiencies in operating costs.

The Plan reports that 90% of the 85 OGA activities identified in the 2016 - 2021 Plan have been delivered. As a result (and in addition to other activities), the OGA boasts associated cost savings of £845 million, including £501 million of decommissioning cost savings.

Looking forward

The OGA’s “way forward” framework was first captured in its inaugural Corporate Plan in 2015. This described seven OGA themes and how they would be pursued in relation to the OGA’s overall ambition, purpose, and values. The framework and themes defined in 2015 remain consistent in the new Plan. However, the priorities, methods of delivery, and KPIs associated with the themes have been updated. One of the key additions is a focus on energy transition and a recognition that the OGA has a role to play in this. The key updates to each of the seven OGA themes are considered below in turn.

Revitalise exploration

A number of activities to be delivered under this theme are said to have been completed. This includes:

  1. plans to deliver significantly improved regional prospectivity and yet-to-find analysis;
  2. to implement a flexible licensing strategy; and
  3. to publish government funded seismic shoots.

The OGA’s priorities will now be to: revitalise offshore exploration with a KPI target of adding 200 million boe per year by 2024 based on a five-year rolling average; and to regulate onshore licensing and consents.

Improve asset stewardship

The Plan states that the OGA has established and implemented a completely new stewardship approach and framework. The priorities under this theme are listed as the attainment and selected update of the Stewardship Expectations and the progression/maturation of resources. Three associated KPIs have been described:

  1. the KPI for production efficiency has been determined as 80% UKCS average production efficiency by 2022 (it is noted that the same KPI was set under the 2016 - 2021 Plan with a target date of Q4 2016);
  2. a KPI has also been set to maintain average unit operating costs around 2017 levels with a target date of 2024; and
  3. a further KPI covers the goal of converting 300 million boe from estimated contingent resources (2C) to proven and probable reserves (2P) annually.

Drive regional development

There are seven priority plans under development for West of Shetland Gas, East of Shetland, Quad 9 Gas, Central Graben Area, Outer Moray Firth, SNS Infrastructure Optimisation and the East Irish Sea. The associated priorities seek to:

  1. deliver regional and area plans;
  2. ensure the right assets are in the right hands; and
  3. stimulate investment.

Improve decommissioning efficiency

Decommissioning will have a significant role to play and the OGA has outlined its threefold approach to decommissioning:

  1. cost performance management;
  2. shared learning; and
  3. cost estimation.

As a priority, the OGA wishes to develop collaborative execution models and develop an enhanced decommissioning supply chain. Alongside this, the OGA has set itself (and industry) the goal of:

  1. achieving a 35% reduction in forecast total decommissioning costs from the 2016 baseline estimate by 2022; and
  2. by 2021, for 90% of all assets, an AACE class 3 estimate (or better) should be submitted to the OGA at least 3 years before each planned decommissioning activity.

Leverage technology and data

Technology is stated to be critical to improving asset performance and developing the remaining hydrocarbon resources. The OGA aims to support adoption or adaptation of available technologies, and promote the development of new technologies. For data, the priority is to deliver digital and information excellence.

Creating the right conditions

The OGA has identified that, in delivering MER UK, there are opportunities to support the energy transition. These include:

  • asset stewardship and decommissioning strategies that encourage extending or reusing infrastructure assets;
  • exploring opportunities for hub or regional strategies and energy integration;
  • eliminating unnecessary or wasteful flaring and venting of gas; and
  • approving and issuing carbon dioxide storage permits.

Additionally, the establishment of the National Data Repository is said to be supporting access to timely data to maximise transition opportunities for the UK oil and gas sector.

Developing people, processes and systems

OGA targets a 5-percentage point increase in its positive engagement score by 2023 and, somewhat broadly, aims to achieve “regulatory excellence” in all its activities.

Comment

The Plan, as with the 2016 - 2021 Plan, essentially recommits the OGA to its original Corporate Plan laid out in 2015. In addition, and in light of the changed external environment, lessons learned, and activities completed to date, the Plan sets out new priorities and focus areas for the next five years.

The Plan also places a firm focus on progress towards Vision 2035, asking industry leaders to work towards this future calling for inclusion, workforce engagement, and collaborative partnerships and business models which can deliver value at pace.