“The Wood Review – a conversation with Sir Ian Wood” – Oil & Gas UK Breakfast Briefing 27 March
On March 27th the UKCS Oil & Gas industry had the first opportunity to hear Sir Ian Wood publicly discuss the final report on Maximising Economic Recovery UK (MER UK). The event, sponsored by Petrotechnics, was part of Oil & Gas UK’s 2014 Aberdeen Breakfast Briefing series. A sit down discussion between Sir Ian Wood and Malcolm Webb, Oil & Gas UK CEO, was followed by questions from the floor.
The report was contextualised with the fact that the current loss value of unrecovered oil is in the region of billions of pounds and that action needs to be taken now to proactively protect the future of the UKCS as a viable oil producing region. The management of small and single fields is more complex than ever because of the combinations of operator and services companies involved. Add to this the fact that there are now more fields than ever before but fewer people working at the Department of Energy and Climate Change (DECC), one of the key actions to come out of the report is the recommendation to establish a new arms length regulator.
This Regulator will not replace DECC but will instead work alongside the Department and will be fully funded by industry in exchange for value adding services. The Regulator will have exceptional in house expertise and so will not simply regulate but will provide licensing, oversee stewardship, facilitate, mediate and remove barriers for the UKCS industry, all whilst keeping low bureaucracy. The vision is for the Regulator to work with industry on industry-wide strategies and have the power to help implement them. The powers of the Regulator are still to be defined but the hope is that there will a capacity for non-binding mediation, collaborative efforts and sanctions.
Critically, the team behind the report have been working hard to get buy in from all the political parties to ensure that this new Regulator will span future governments, regardless of which party is in power.
In light of the second key theme of the report, collaboration, there was recognition of the great work already being done by initiatives such as the Production Efficiency Task Force (PETF), of which Petrotechnics’ CEO Phil Murray is active and contributing member. The theme of Sir Ian’s position on the work done by these initiatives is that their momentum needs to be harnessed and pushed even more aggressively by an organisation capable to implementing real change and with the time and resources required to make this happen. Indeed, Sir Ian pointed out that a key challenge for the Regulator will be how to fairly divide up the maximised economic recovery as this comes to fruition.
As a key part of the Regulator’s role will be focussing on collaboration, Operators were interviewed as part of the research which led to the report and there was a large appetite to collaborate on exploration and development. Suggestions on areas of possible collaboration touched on the ideas that Operators could share geophysical information or coordinate field-wide during summer shutdowns so that equipment like floating exploration rigs can be shared. The key collaboration strategies for exploration have been outlined as data sharing, asset stewardship, infrastructure, technology and decommissioning.
When the floor was opened up for questions, the subject of nationalising infrastructure was raised. Sir Ian responded that this has had not been considered a good idea but there was a possibility that the UK Govt could co-invest in some things.
The question was also posed as to whether the new Regulator would be “just another party” in commercial disputes and actually make the process longer? Sir Ian felt that Regulator involvement would speed up the process because Operators will not want the Regulator to begin coming up with solutions that they have no control over so they will move quickly to find resolutions that best suit them.
The morning was rounded off with Sir Ian encouraging the industry to use their contacts to keep pressure on DECC & Government to keep the implementation of MER UK and the new Regulator to timescale. He also encouraged industry to begin addressing actions outlined in the report and not to wait for the set up of the Regulator to begin doing this.
The full webcast including the Q&A can be viewed online here