Oil and Gas Regulator orders N. Sea operators to collaborate more to maximise production and cut-costs. Or else …

Dr. Andy Samuel
Dr. Andy Samuel

The North Sea oil and gas regulator has called on the industry to work faster and also for exploration and production companies – which it licenses – to work in great collaboration with each other to maximise economic recovery (MER) from the ageing basin.

Dr. Andy Samuel, Chief Executive of the Aberdeen-based Oil and Gas Authority (OGA) has been under-whelmed by the lack of progress towards greater collaboration – now a legal requirement laid down on oil companies under the 2013 Energy Act since its implementation last year.

In a warning letter to Tier-1 oil chiefs, Samuel reminds them that – further to the recommendations of Sir Ian Wood’s Review –  collaboration was incorporated in the Petroleum Act 1998 as a key part of delivering the principal objective of maximising economic recovery (MER).

And through the MER UK Strategy, collaboration was elevated from being a matter of general practice to a statutory obligation.

The OGA has subsequently produced and published its Collaborative Behaviour Quantification Tool (CBQT) with supporting guidance. Developed with industry to provide an assessment of collaborative behaviours, it covers areas such as; negotiations, ability to learn and share experiences and constructive and flexible attitudes to change.

But Samuel said: “Over the last two years, we have seen many positive examples of collaboration between companies leading to solutions to long-running issues and significant value has been created as a result.

“However, there remains more to do if we are to maximise value from the UK’s considerable remaining hydrocarbon resources <in the North Sea>.

“With the publication of the OGA’s Asset Stewardship Expectations, the Collaborative Behaviour Quantification Tool (CBQT **) and most importantly, with the right people round the table in constructive dialogue, we can continue to catalyse positive behavioural change.

“Improvements in company commercial behaviours make a fundamental impact on MER UK and underpin our vision for the UK’s oil and gas industry.”

For example, following a successful pilot with Chevron North Sea Limited (CNSL) last year, CBQT will now be undertaken by operators and the OGA every two years, starting in this summer.

Under CBQT, operators may be ‘requested’ by OGA to submit an improvement plan within six months of the review which will focus on improvement of collaboration behaviours.

Greta Lydecker, Managing Director, Chevron UK, said: “A commitment to real collaboration across the North Sea will help reduce costs and create opportunities throughout the value chain.

“The challenge for operators is that collaboration can have different interpretations and to make meaningful progress in this area requires clearly defined behavioural expectations and leadership to set the right culture.”

Samuel added: “The Oil and Gas Authority (OGA) reaffirms its focus on the importance of collaboration and is urging industry to increase the pace at which licensees develop a culture of collaboration internally, and externally with existing joint venture (JV) partnerships and beyond.”

Oil and gas engineers have told Scottish Energy News that this is polite management-speak which means:

‘Some of you Big Oil guys are dragging your feet and not working as an effective member of Team North Sea.

“We know you are and if you don’t start improving and play nice, you’ll be ordered into the OGA for a corporate spanking”.

** The OGA CBQT policy can be found here as ‘punishment homework’ for the non-collaborators to learn

Samuel added: “Last year, the OGA published its Competition and Collaboration paper, which outlined matters for industry to consider related to collaboration and competition law in the UKCS oil and gas market.

“It is our view that such considerations should not be used as an excuse not to comply with the obligations set in the MER UK Strategy, unless they are well-founded

Mike Tholen, Upstream Policy Director with Oil & Gas UK, added: “We are confident that the Collaborative Behaviour Quantification Tool** will demonstrate the success of this new way of working.”

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