influence: r0 g174 b239 promote: r0 g101 b162 regulate ... · 64 discoveries may form 18 potential...

Regulate: R312 G50 B155

Promote: R0 G101 B162

Influence: R0 G174 B239

Asset stewardship: R154 G149 B0

Technology/data: R239 G130 B0

Right conditions: R166 G25 B46

People/process: R99 G102 B106

Decom: R0 G184 B176

Exploration: R72 G168 B66

OGA colour family R-G-B

Use the colour picker or

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© OGA 2017 This presentation is for illustrative purposes only. The OGA makes no representations or warranties, express or implied, regarding the quality, completeness or accuracy of the information contained herein. All and any such

responsibility and liability is expressly disclaimed. The OGA does not provide endorsements or investment recommendations. Oil and Gas Authority is a limited company registered in England and Wales with registered number

09666504 and VAT registered number 249433979. Our registered office is at 21 Bloomsbury Street, London, United Kingdom, WC1B 3HF

Re-inventing the UKCS to Maximise Economic Recovery

Dr Andy Samuel

Chief Executive

September 2017








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Today’s agenda

Reflections on recent years

The prize ahead

Area plans Graphic3

Decommissioning

Conclusions

What still needs to change? Graphic3

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Industry outcomes

E&A

wells

Production

efficiency (%)

Unit operating

costs ($)

Production

(million boepd)

Oil price Government response Government response

31 1.4 65 30 2014

HMT Driving Investment

Scotland’s Expert Commission

Wood Review

Reflections: 2014 ‘Crisis looming’








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Industry outcomes

Government response Government response

31 1.4 65 30 2014

2015 26 1.6 71 21

2015 Emergency

response

£1.3bn fiscal

package

£20m for seismic

E&A

wells

Production

efficiency (%)

Unit operating

costs ($)

Production

(million boepd)

2015 ‘Emergency Response’

Oil price

2014 Crisis



Wood Review








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Industry outcomes


31 1.4 65 30 2014

2015 26 1.6 71 21

2014 Crisis

2016

Fightback

2016 22 73 16

2015 Emergency

response

2016 ‘Fightback’

PRT reduced to 0%,

SCT reduced to 10%,

further £20m for seismic,

£180m for OGTC

£1.3bn fiscal

package

£20m for seismic

E&A

wells

Production

efficiency (%)

Unit operating

costs ($)

Production

(million boepd)

1.65

Oil price



Wood Review








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Industry outcomes


31 65 30 2014

2015 26 71 21

2014 Crisis

2015 Emergency

response

2016

Fightback

2016 22 73 16 2017

2017 PRT reduced to 0%,

SCT reduced to 10%,

further £20m for seismic,

£180m for OGTC

2017

£1.3bn fiscal

package

£20m for seismic

E&A

wells

Production

efficiency (%)

Unit operating

costs ($) 1.4 1.6 Production

(million boepd)

1.65

Oil price



Wood Review








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OGA in action

New stewardship

regime

Sector wide data Guidance

Strategies

Protect existing barrels mmboe

455

New barrels added mmboe

738 1193 292 Tripartite

barrels mmboe

Costs

mitigated £m

189 success stories to end July 2017 recorded across the OGA,

in partnership with industry and government

1.75 Value of

investments £bn

Time saved

to industry (fast-tracked

consents)

2614 Days

Exploration

Decom

EOR

IM Technology

Tight Gas

Competition Meetings Financial

penalty Sanctions TPA

Stewardship

Expectations

Tiered

reviews Behaviours

Projects

lessons learned

Wells & Decom

Hackathons

PE Unsactioned

discoveries pack

Asset Stewardship

Supply Chain MER UK








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Enabling assets to change hands

Contracting

strategies,

standardise

and simplify

Cost

Reduction

OGA flexible

and enforcing

MER UK

Strategy

Right Assets

Right Hands

Infrastructure

Code of

Practice

underpinned

by powers

Access to

Infrastructure

Area hubs and

strategy

synergies to

help optimise

asset packages

Divestment

Packages

Working with

finance and

investment

community

Lack of

Capital

Improvements

to fiscal terms,

including late-

life assets

Fiscal

Regime

Facilitation

and

standardised

agreements

and processes

JOA

Misalignment

OGA issued

cost norms

and

benchmarking

Decom

Fields

Pipeline Terminal

Operator

Interest

The OGA does not provide endorsements or investment recommendations. Some transactions

are still subject to OGA and other regulatory consideration, their inclusion on this slide is not an indication of the outcome of that consideration.

Discovery








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0

0.5

1

1.5

2

2010 2015 2020 2025 2030 2035 2040 2045 2050

millio

n b

oe/d

ay

Oil and gas in the UKCS (mmboe/d)

OBR Forecast

Pre Wood 2016+Estimate

Gas Condensate Oil Under

evaluation

Current forecasts

0

5

10

15

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

2015

201

6

201

7

201

8

201

9

202

0

£ b

illi

on

Annual Development Capital Expenditure

Actual

Projection

2.1

bnboe

added

Gas Condensate Oil Under

evaluation

Gas

Condensate

Oil

Under evaluation

UKCS Field Consents








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Success rate

>50%

<$2/bbl

exploration

finding cost

Revitalising exploration

CNS

WoS

NNS

SNS

YTF

6bnboe

SNS SNS

Other

Oil

Gas

Loanan

Lincoln

Storr W/E

Belinda

Eagle

Laverda

Finlaggan

Bagpuss

Winchelsea

Skipper

Remaining

potential

OGA

action

v

2016 E&A

successes

Seismic surveys

Seismic reprocessing

Data release

Reports

New licensing regime

Lancaster

29th Licensing Round

Variable and flexible durations

Lower rental rates

Developed in collaboration

with industry

New innovate licence

Strong and diverse applications

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30th Round Mature/producing areas of the UKCS

Over 800 blocks on offer

some not available since 1965

Open for applications until 21 November 2017

31st Round Opens in 2018 with further free seismic

Focusing on frontier, less explored areas

2017/18: Licensing rounds

2015/16 legacy and reprocessed legacy lines

2015/16 2D broadband acquisition

30th Licensing Round Areas

UKCS Designated Area

Oil Field

Gas Field

Gas Condensate Field








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6 8 21 30 0

10

20

30

40

Moray Firth Central North Sea

Making data and insights available

New and reprocessed

government seismic

Technical montages and data packages

Regional maps

Over 5000

downloads

250,000 GIS

requests in one day

64 discoveries may form 18

potential clusters 43 discoveries may form

11 potential clusters

Potential “clusters” of discoveries

Undeveloped discoveries

data portal

Tech

nic

all

y r

ec v

olu

mes

(mm

bo

e)

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Unlocking undeveloped discoveries

mm

bo

e

Producing fields

Ongoing developments

Currently locked discoveries

10

100

1000 Subsea storage

Versatile Production Unit Spooled pipeline

Unmanned buoy

Over 350 undeveloped discoveries and a key focus area of 30th Round

Remaining reserves

350 undeveloped discoveries currently not

being pursued across the UKCS with

over 3bn boe potential

Examples of technology








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Unlocking undeveloped discoveries

mm

bo

e

Producing fields

Ongoing developments

Currently locked discoveries

10

100

1000

Over 350 undeveloped discoveries and a key focus area of 30th Round

Remaining reserves

350 undeveloped discoveries currently not

being pursued across the UKCS with

over 3bn boe potential

Technology Forum, 22nd August 2017

Over 300 delegates and 36 exhibitors

• Seismic & subsurface

• Subsea Tie-Back of the Future

• Wells

• Standalone Hubs and Clusters

Need to solve the rush to be second

1000








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select colour. Case study: Alpha Petroleum

Different operator mindset and

way of working

SURF/SPS functional tender

rather than price

Collaborative Contractor Club

• no bespoke solutions

• all price competitive

Baker Hughes/GE

fully integrated solution

Redeploy FPSO – best fit solution

Investment giving senior banks

confidence

Unlocking Cheviot

Cheviot

Benchmarking recovery factor

Regression analysis

Inputs: range of data, from FDPs and other sources

Considered in FQI Factors outwith FQI

Operation Development Reservoir quality

Porosity

Permeability

Net to gross

Faulting/

compartmentalisation

Oil / water

saturations

Fluid properties

Number of wells

Injector /

producer ratio

Processing

facility size

Development

concept

Water injection

efficiency

Well

interventions

Plant

optimisation

Operational

uptime

Reservoir

management

Remaining reserves Fields in same geological unit

Percentage of shut-in wells Voidage replacement ratio

Field Quality Index (FQI)

80

80 80

Recovery

facto

r %

High Low

Percentage of Shut in Wells

80

FQI

Recovery

facto

r %

FQI FQI

Recovery

fa

cto

r %

FQI

Recovery

facto

%r

80

80

80

80

Improving through stewardship Inputs: range of data, from FDPs and other sources

80s 90s 2000s 2010s

Decade of first oil








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select colour. Area Plans

Guidance published

July 2017

Need to be industry

owned - OGA can

initiate

Integrate area scopes

High value creating

West of Shetland Gas 1.6bn boe incremental

Theddlethorpe Catchment Area (TCA) 0.15bn boe incremental

Central Graben Area (CGA) 1bn boe incremental

FPS Stewardship

SNS Tight Gas 0.65bn boe remaining gas accessible

West Sole 0.08bn boe incremental

East of Shetland 0.4bn boe incremental

Quad 9 Gas Maximise oil whilst progress to blowdown

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West Sole Catchment Area

Potential

81mm boe (risked) incremental

NPV10 $510MM

The need for operators to

work together

Standalone undeveloped

discoveries marginal

Potential to unlock incremental

value through collaborative effort

Forward plan

1. OGA study completed 2016 - fully transitioned to industry

2. Industry led work group - engineering studies initiated

3. Economic and commercial forum initiated

4. Technology and supply chain forum commencing Q4 2017

5. Three appraisal wells planned for 2018 Centrica Olympus

Dana Platypus

Hansa Pharos

Premier Cobra

Glein (unlicensed)

West Sole Participating fields:








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Includes infill and development wells, appraisal and exploration wells

Southern North Sea (SNS) Tight Gas

Potential

655mm boe of gas (risked)


work together

Discrete opportunities

distributed across the SNS

Resources restricted by high

cost and uncertainty

Forward plan

1. Support existing tight gas projects (pre and post well reviews)

2. Reduce risks by sharing knowledge and expertise (EEEGR tight gas group)

3. Promote opportunities to campaign activities across operators

4. Develop and deploy appropriate technology (Hackathon June 2017 / OGTC)

inclusive of infill, undeveloped

discoveries and prospects

SNS projected tight gas drilling activities (sanctioned and unsanctioned)

2017 2018 2019 2020 2021 2022 2023 2024

Nu

mb

er

of

we

lls

Carboniferous play

Permian play








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Greater Fulmar

discussions underway

Greater J Ridge

commence Q1 2018

East Central Graben

commence Q4 2017

Central Graben

Greater

Fulmar

East

Central

Graben

Greater

J Ridge

Potential

1bn boe incremental

recoverable resources

NPV10 $6bn


work together

Declining production and over

capacity in infrastructure

Exploration potential - but

focused on individual hubs rather

than area solutions

Forward plan

1. Conclude OGA area plan review

2. Convene MD meetings to hand over to industry

3. On-going OGA governance of industry led area plans








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Northern Hub

commence Q4 2017

WOSPS

Q1/Q2 2018

Greater Laggan

promotion

Rosebank

stewardship

West of Shetland (Gas)

WOSPS

Rosebank

Northern

Hub

Greater

Laggan

Area

Potential

6.3bn boe incremental (unrisked)

NPV10 $43bn (total including

base)


work together

Discoveries currently not being

sanctioned

Resources restricted by current

infrastructure

Forward plan

1. Review how current infrastructure can be optimised

2. Review potential for licence consolidation

3. Form groups with relevant JVs








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What needs to change?

‘They are now explicitly

and unashamedly

linking the two

unrelated issues,

despite the fact that

they involve separate

JVs and we are not in a

position to bargain one

issue off against the

other’

‘At the core of the protracted negotiations

has been a desire by certain owners to

seek excessive levels of financial security

to eliminate risk, contractual modifications

designed to secure additional control over

operations and an attempt to

opportunistically seek closure on a range

of long standing issues’

Against a brick wall

Recent industry quotes…

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Use of Powers - Successes register as at 31 July 2017

33 Successes to date

5 Facilitation

17 Enhanced facilitation

10 Formal intervention

1 OGA Powers Formal

intervention

Enhanced

Facilitation

OGA

Powers

Asset Transfer 1 3

Licence

Commitment 4 4

Intra JV 2 5 1

Inter JV 2 1 1

Access to

Infrastructure 2 1 1

Area Solution 1 4

Facilitation

OGA led

Stewardship expectations, and Tier 1 collaboration reviews

Industry led Refresh Commercial

Develop/

Benchmark

and Infrastructure extend/(simplify) industry Cultural Codes of Practice Standard commercial Change

(CCoP and ICoP) Agreements delivery Champion

Cultural

Change

Commercial solutions








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select colour. Supply Chain Action Plans (SCAPs)

SCAP process facilitates and demonstrates that operators are:

MER UK

Strategy

Legally binding

obligations

Field Development Plan

/ Decommissioning

Programme

All projects requiring

an FDP/DP should

produce a SCAP

Stewardship

Expectations

Tier 1 contractors

should complete

SCAPs for projects

>£25m

SE-05 Robust

project delivery

SE-10 Planning for

decommissioning Innovation Quality

Engagement Trust

Evaluation Criteria








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0

1

2

3

4

5

6

7

Gro

ss

Fo

rec

as

t D

ec

om

mis

sio

nin

g

Ex

pe

nd

itu

re (£

bn

)

Others

Majors

Decommissioning – Status Update

Decommissioning Cost Estimate


OGA base

cost estimate

is £59.7bn

Decommissioning cost

distribution

Source: OGA Stewardship Survey 2016

Five

companies’

assets

amount to

50% of total

decom

costs

£35bn £103bn

0

3.5

Target

£39bn

P10

£44.5bn P50

£59.75bn P90

£82.7bn








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Imp

rove d

eco

mm

issio

nin

g e

ffic

ien

cy

Cost certainty and reduction

• Benchmarking

• Metrics on high

cost elements

• Standardisation

• Sharing best

practices

Delivery

capability

• Learning from other industries

• Innovative contracting & commercial approach

• New centre of excellence

Regulatory guidance

• Early conversations with regulators

• Evidence based

Well

abandonment

• Campaign approach

• Suspended well stewardship

• Pilot and upscale

• Technology

10%-15% 25%-35% 15%-20% 35%-45%

Potential savings (not additive)

Total estimated decommissioning cost by category

Total estimated decommissioning cost by area

Cost reduction focus








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Benchmarking example

Dashboards

benchmark industry estimates

Encouraging industry to share

lessons learned

Promoting innovation and

collaboration

Update report on annual progress








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Brent

Cost decrease over £1bn

Supply chain cost reductions:

topsides & substructure removal

Reduced well P&A costs:

contracting & execution strategy,

efficiency improvements

Learnings transferable:

Shell willing to share

Murchison

Lessons learned to help halve cost of

future projects

2 years ahead of schedule

estimated final cost 88% of sanction cost

Early engagement with contractors

flexibility of schedule

Sharing/engagement with regulators,

peers and industry

SNS

Internal well P&A campaigns delivering

50% cost reductions

Multi-operator well P&A to further

reduce costs and share experiences

Optimisation of schedule and market

flexibility

Engaging with SNS peers/industry

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwj0kse8yZzTAhVL6RQKHbMYA20QjRwIBw&url=https://twitter.com/shellstationsuk&psig=AFQjCNGGJ3yLz3frnIGHB-eRvdINSmyzqw&ust=1492005960750580

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjvwfKbypzTAhXGVRQKHZnhDv8QjRwIBw&url=https://en.wikipedia.org/wiki/File:ConocoPhillips_Logo.svg&psig=AFQjCNHVZ51aMLElfKGM1AotgM4g-KUbsw&ust=1492006160755065








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Edradour/ Glenlivet

The OGA does not provide

endorsements or investment

recommendations. Those

projects listed are not

necessarily a definitive list

Sanctioned projects not yet in production Started production in 2016 and H1 2017

Conclusions

Clair Ridge

Cayley / Shaw

Conwy

Solan

Laggan Tormore

Scolty/ Crathes

Mariner

Quad 204 Redevelopment

Orlando

Morrone

Aviat

Stella

Culzean

Cygnus

Flyndre

Utgard

Kraken

Western Isles

Catcher Area

MER UK: further great potential

Good progress already made

Clear way forward

Embrace and sustain change

Thank you








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