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Page added on February 24, 2014

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Britain creates new oil and gas regulator to tackle falling output

Public Policy

Britain said it would create a new oil and gas regulator which will help UK explorers speed up their search for hard-to-access fossil fuel resources in a bid to counter plunging North Sea production rates.

A government-commissioned report published on Monday said Britain could lose out on a potential 200 billion pounds worth of oil and gas output if measures proposed in the report are not followed.

The country’s oil and gas output has fallen around two thirds since its peak at the turn of the century, but up to 24 billion barrels of oil equivalent (boe) are expected to still come out of the ground.

Oil and gas companies active in the UK’s Continental Shelf (UKCS) are expected to meet most of the costs of a new oil and gas regulator that will speed up licensing processes, help coordinate exploration data and enforce rules to maximise well output.

Running a new regulator is estimated to cost 20-30 million pounds a year, a small amount compared to revenues oil and gas explorers make from selling fossil fuel.

View gallery

Employees work on the BP Eastern Trough Area Project …

Employees work on the BP Eastern Trough Area Project (ETAP) oil platform in the North Sea, around 10 …

The government’s decision to create a dedicated regulator follows a recommendation in the oil and gas sector’s first review since the mid-1990s, also known as the Wood Review.

The North Sea is thought to contain billions of barrels of hard-to-reach oil but with many platforms and pipelines coming to the end of their working lives, time is fast running out to get at them. The review’s task was outlining how to make that easier.

Big players in the oil and gas industry, such as BP, Statoil or Shell, welcomed the creation of a new regulator.

Industry and government are still discussing the exact split up of the costs to run the body, with a decision expected by the summer, a government spokeswoman said.

“These are matters for the whole industry and we will be working with other operators, the government and the regulator to look closely at the details and practical implementation of today’s report,” said a spokesman for Shell.

View gallery

A section of the BP Eastern Trough Area Project oil …

A section of the BP Eastern Trough Area Project (ETAP) oil platform is seen in the North Sea, around …

Industry experts say the cost to companies is dwarfed by the benefits a smooth-running regulator would offer.

“I believe industry will have to pay, but in return should be granted appropriate service level agreements,” said Sir Ian Wood, author of the review and former chairman of oil services company Wood Group, without providing figures.

SENSE OF URGENCY

Government revenues from North Sea production fell more than 40 percent to 4.7 billion pounds in 2012-13, underlining the sector’s importance to Britain’s economic recovery.

The government’s aim to appoint a chief executive to run the regulator this summer shows that tackling the decline in oil and gas output is an urgent matter, said Judith Aldersey-Williams, partner at law firm CMS.

View gallery

A section of the BP Eastern Trough Area Project oil …

A section of the BP Eastern Trough Area Project (ETAP) oil platform is seen in the North Sea, around …

“That suggests a real sense of urgency and I think that’s quite encouraging,” she said.

The new regulator will block any major investments that do not sufficiently focus on extracting maximum potential from North Sea fields, a move which could result in some operators losing their licences, Wood said.

Wood, whose report estimates that about 24 billion barrels of oil equivalent could still be buried beneath the UK part of the North Sea, also recommended the regulator should enforce rules for companies to share exploration data more quickly.

“I fully back Sir Ian Wood’s recommendations and we will start implementing them immediately,” said Britain’s Energy and Climate Change Secretary Ed Davey in a statement.

A focus on more drilling for oil and gas in more remote areas could benefit companies which specialise in exploration such as Seadrill, Noble or Rowan.

“We strongly welcome the proposal for a new arm’s length regulator with additional powers and resources…The report is a game changer,” said Malcolm Webb, chief executive of Oil & Gas UK, Britain’s fossil fuel industry lobby group.

Britain’s plan to squeeze more oil and gas out of its mature market could be a blueprint for other countries whose exploration programmes are yet to reach this stage.

Reuters Yahoo



6 Comments on "Britain creates new oil and gas regulator to tackle falling output"

  1. rockman on Mon, 24th Feb 2014 6:30 pm 

    “Running a new regulator is estimated to cost $30 – $50 million a year, a small amount compared to revenues oil and gas explorers make from selling fossil fuel.” More bureaucratic BS IMHO. Yes…small compared to industry revenue. And very small compared to the revenue the British govt receives from the NS operators. During 2009-10 the govt collected $10.8 BILLION from operators in the form of the North Sea corporation tax and the Petroleum revenue tax. The “regulator” expense represents less that 0.5% of the govt revenue.

    So if the govt thinks this new regulator “tackling the decline in oil and gas output is an urgent matter” and would truly be beneficial to the process you would think they wouldn’t hesitate to fund the effort themselves. So just maybe it’s really more of a scheme to pull a tad more income from NS operators and won’t really make a difference in their opinion.

  2. Nony on Mon, 24th Feb 2014 7:08 pm 

    I agree that funding from already existing tax revenue seems like a no brainer. ESPECIALLY if they really think the entity will lead to increased production (and thus more taxes) in the end.

    Few questions:

    1. “The new regulator will block any major investments that do not sufficiently focus on extracting maximum potential from North Sea fields, a move which could result in some operators losing their licences, Wood said.” What does this mean (what examples are they talking about?) Also, why would any operator not already be incented to maximize potential? (Not saying it’s impossible people are playing games, but wonder if so, how.) Or do they think that they can sort of pick winners and losers better than the auctions do?

    2. How important are regulators? We have 50 different state examples in the US and a lot of different countries to look at. What are some of the better ones. Or if none are “good”, surely some are “bad” and others are “do no harm”. In other words, what makes up a good regulator. What could they change in the UK to make things better. (What are the parameters to vary?)

    3. Will this new regulator entity cover oil and gas in general (including onshore) or just offshore?

  3. Kenz300 on Mon, 24th Feb 2014 7:56 pm 

    The cost of oil, coal and nuclear keeps rising…..

    The cost of wind and solar keeps dropping ………….

    Yet the powers that be continue to go down the same path pushing for more gas and oil………

  4. mike on Mon, 24th Feb 2014 8:21 pm 

    ” 24 billion barrels of oil equivalent”

    Production is declining, the most easily reached oil has been reached. All that is left soon will be the tough stuff, onlyt worth getting if oil prices go up, presumably. The North Sea is near being worked out, but both the UK government, and the Scottish government are hyping this fabulous wealth that is there for the taking. Cameron, because he can say that only a UK (“sixthe largest economy in the world”)that includes Scotland has the clout to ensure the continued development of the “vast” wealth, and Salmond because he can say an independent Scotland can be financed by the exploitation of this oil wealth. They are both fools. 24 Billion barrels of oil equivalent maybe (Much of it presumably gas down in the English sector) but flowing out into the refineries and tanks on land at such a slow rate that it will generate piddling amounts of wealth per year. Not enough to restore the UK to oil independence, and not enough to provide the income to a high spending indepenbdent Scotland.

  5. rockman on Mon, 24th Feb 2014 8:33 pm 

    Nony – To be honest little of what they say makes sense to me. The one area that could be focused upon is to share some infrastructure on more of a “commons basis”. For instance I have a NG pipeline with extra capacity. You don’t have enough reserves in your well to justify a pipeline. I’ll let you use my line but I’ll charge you so much that it loses incentive for you. In such a situation the govt might require I give you access. Unfortunately the details of such situations are far more complex.

  6. MSN (revised) fanboy on Mon, 24th Feb 2014 10:05 pm 

    T

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