UKCS Maximising Recovery Review Final Report

INTRODUCTION

On 10 June 2013 Edward Davey MP, Secretary of State for Energy and Climate Change, announced a review of UK offshore oil and gas recovery and its regulation, led by
Sir Ian Wood.

The UK’s oil and gas industry is of national importance and makes a substantial contribution to our economy, energy security and employment. 42 billion barrels of oil and gas have already been produced from the UK Continental Shelf (UKCS), and 12 – 24 billion more could still be produced.

So it is vital that we make the most of the huge opportunity that the UKCS continues to represent.

While investment levels are rising and the near-term prospects for the UKCS are strong, as one of the most mature offshore basins in the world, it faces unprecedented challenges in a very different exploration and production environment compared to when production peaked 15 years ago. Thus, this focused in-depth review.

FINAL REPORT PUBLISHED

Proposals for greatly enhanced stewardship of the next phase of the UKCS’s life to maximise oil and gas recovery.

I am pleased to publish my Final Report today (24 Feb 2014).

Since Edward Davey, Secretary of State for Energy and Climate Change, asked me in June of last year to lead a review of UK offshore oil and gas recovery, I have taken evidence from a wide variety of interested parties, including approximately:

  • 40 companies who have a licence interest in the UKCS; together these companies account for more than 95 per cent of UKCS production and investment
  • 15 companies from the supply chain and other key stakeholders in UKCS activities
  • 20 key Government figures in DECC, HM Treasury, BIS, Scotland Office and the Scottish Government; and
  • 5 International regulators from the USA, Canada, Norway, the Netherlands and Australia
  • 75 written submissions in response to key questions and the Interim Report, published on 11 November 2013

I would like to express my gratitude to all those who have contributed, from both government and industry. The evidence I have received has been consistent and clear. The UKCS is facing a new set of challenges, which are not insurmountable, but will become more difficult to address if we do not act quickly. We must strengthen the capacity and capability of our stewardship regime to significantly enhance collaboration across the UKCS if we are to meet the demands of maturity and diversity, and maximise the economic benefits for both the country and the industry.

In my final report, I set out my recommendations for the next phase of the UKCS. My core recommendations are:

  • A new shared strategy for “maximising economic recovery (of oil and gas) for the UK”, with commitment from the government (HM Treasury and a new Regulator) and the oil and gas industry.
  • Creation of a new arm’s length regulatory body to oversee and develop this programme of change and growth.
  • Greater collaboration and commitments by industry in areas such as development of regional hubs, sharing of infrastructure and reducing the complexity and delays in current legal and commercial processes.

These recommendations received overwhelming Industry support in written feedback and at various meetings. I have also been encouraged by the positive engagement from DECC, HM Treasury and senior Government Ministers.

In my Final Report, I have taken account of feedback, provided more information on how I see MER UK working and outlined six Sector Strategies, highlighting their role in MER UK, for the Regulator and Industry to take forward.

The proposals on limited new powers are much more about stronger and better stewardship than more regulation. I am clear that the development of the UKCS must continue to be led by the operators who provide the significant investment of funds, expertise and experience. The new Regulator’s role will be licensing, supervision and stewardship. It must be low on bureaucracy, high in skills and experience and strong and pragmatic. It must be the catalyst for maximising the economic recovery by facilitating, co-ordinating, mediating and promoting collaboration, removing barriers, and encouraging more efficient exploration, development and production. In this way, the new Regulator will influence and guide investment decisions towards achieving the MER UK strategy.

I believe this Review provides a real opportunity for a positive step change in the UK’s stewardship of its oil and gas reserves to everyone’s benefit, with a substantial prize on offer for both Government and Industry. My report estimates that full and rapid implementation will deliver at least 3-4bn boe more than would otherwise be recovered over the next 20 years, bringing over £200bn additional value to the UK economy.

The UK offshore oil and gas industry has made an immeasurable and vastly under estimated contribution to the UK economy over the past 50 years. This Review provides the opportunity for it to face its next 30 years and beyond, supported by a better resourced, more focused Regulator working with HM Treasury and Industry in greater collaboration to take us closer to the 24 billion boe prize potentially to come.

I am grateful to the Secretary of State, Edward Davey, for giving me this opportunity to pull together the views expressed by many fine people from DECC and other Government departments as well as Industry and the wider UKCS stakeholders. The key to success of our industry is in their hands.

Sir Ian Wood
Leader
UKCS Maximising Recovery Review

UKCS MAXIMISING ECONOMIC RECOVERY REVIEW

SIR IAN WOOD'S COMMENTS ON GOVERNMENT'S RESPONSE TO SIR IAN'S UKCS MER REVIEW

16 July 2014

I welcome the Government Response and update on progress on the implementation of the recommendations contained in my UKCS Maximising Economic Recovery (MER UK) Review. This had already been given full backing from Government and it has been on fast track implementation over the last few months. We now have a name - Oil & Gas Authority (OGA); we have a headquarters location - Aberdeen; the search for the Chief Executive is well under way and today's update confirms that the new Regulator will be a Government Company (GovCo) which will ensure the right level of independence to enable the Regulator to deliver the far reaching recommendations proposed. It is also gratifying to see Government undertaking to support the start-up of the new Regulator with a contribution of £3m per annum for the first 5 years.

In all the circumstances, Industry should be pleased with the progress, and the Interim Advisory Panel (IAP), which I chair, will continue to work closely with DECC to maintain this. The GovCo will take some time to set up but in the meantime DECC are going ahead with an Executive Agency which will enable the new Regulator to begin to have an impact soon after the new Chief Executive joins. In the meantime, the present DECC management and team are, where possible, beginning to work to the principles of the new recommendations and this should enable the new Chief Executive and team to make faster progress when they start.

I, and the other industry members of IAP, would like to thank our Energy Minister, Michael Fallon, for his role in the concept of the MER UK Principles and look forward to working with the new Energy Minister, Matt Hancock, who, working with Secretary of State Ed Davey, will play the important role of championing the new Regulator.

Sir Ian Wood
Leader
UKCS Maximising Economic Recovery Review


PUBLICATIONS AND TERMS OF REFERENCE

Below are links to the Terms of Reference for the review, the full Written Ministerial Statement that was placed in the Parliament on 10 June 2013, the interim and final reports and their corresponding press releases:

Please read the Terms of Reference for the review and the full Written Ministerial Statement that was placed in the Parliament on 10 June 2013: