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New era of collaboration ahead

New era of collaboration ahead

Twenty years ago, life was very different. In fact, it was much simpler.

Most of us had our television needs serviced by just four channels, Scotland were half-decent at football and an iPad was still something you wore on your face after an optical procedure.

Today, we wear specs which are computers, use phones which can control our household items and have tiny tablet computers which can pretty much take care of everything else.

The UK oil and gas industry – home to the best of British innovation – has also gone through a similar sea change.

Where once, like our television needs, oil and gas came from just a handful of large sources, we now have hundreds of producing fields.

But the Department for Energy and Climate Change, which governs the sector, has failed to keep up.

In the early 1990s, DECC had 90 personnel dealing with the 90 fields in operation. Now there are more than 300, yet the number of DECC staff has fallen to 50. Now, for the good of the industry, it is being cut loose.

Light-touch regulation worked in the early days, but a different beast is needed now, as a complex network of interdependent fields has created a Mecca for commercial lawyers.

Disputes over access to infrastructure have left projects stranded, which in times of declining production is unforgivable.

Sir Ian Wood’s universally welcomed review of the sector is leading to the formation of a new regulator, which is being funded by industry.

His 68-page report, released in February, set out in black and white exactly what the North Sea needs to survive – and then thrive once more.

A broad agreement between industry, government and the Treasury to work together for the good of the country lies at its heart.

And the new era of collaboration will be led by the new regulator. But what will it look like, and what will it do?

That will be shaped by its chief executive, whomever he or she may be. The UK Government has already launched its hunt for the right candidate.

Sir Ian says that person will need super-hero qualities, and be respected across the energy industry. After all, it will be their job to win consensus among rival companies.

Moves are also afoot to make sure the body can offer the kind of salary that will tempt a top industry player into the role.

And, unlike now, the new regulator will have teeth to make sure companies are working for the greater good of the UKCS, rather than commercial gain.

Its new powers will ensure that all licence holders act in a way that is consistent with maximising North Sea oil recovery, including increased collaboration between companies – particularly around access to infrastructure – and improved data sharing.

Companies who fail to act in a manner designed to maximise output from the UKCS could ultimately lose their production licences.

The regulator will also be involved in dispute resolution between companies to help improve collaboration.

In addition, it will have the right to attend meetings between licence holders.

It is hoped that the measures will finally help to increase production and exploration. But only if the fiscal regime is right.

As part of the new era of collaboration, the Treasury has launched a review of all North Sea taxes, and changes will be announced in next year’s Budget.

Together, Sir Ian hopes these measures can yield an extra four billion barrels over the next 20 years. But as he put it himself, this is only the beginning.