uk north sea strategy and innovations for late life and ......strategy and innovations for late life...
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UK North Sea
Strategy and Innovations for
Late Life and Decommissioning
Gunther Newcombe, Operations Director
© OGA 2017 This presentation is for illustrative purposes only. The OGA makes no representations or warranties, express or implied, regarding the quality, completeness or accuracy of the information contained herein. All and any such responsibility and liability is expressly
disclaimed. The OGA does not provide endorsements or investment recommendations. Oil and Gas Authority is a limited company registered in England and Wales with registered number 09666504 and VAT registered number 249433979. Our registered office is at
21 Bloomsbury Street, London, United Kingdom, WC1B 3HF
The UKCS offshore oil and gas sector is
high cost, low efficiency with limited
remaining potential
TRUE FALSE
Slide 3
Framework & approach
Role of the OGA
Investment
and action
Encouraging
collaboration
Effective
stewardship
Striking the right balance
Asset
Stewardship
Strategies &
Delivery Plans
Area Plans
OGA is a progressive regulator
Slide 4
Imp
rov
e d
eco
mm
issio
nin
g
eff
icie
nc
y
29
Fiscally competitive
Petroleum Revenue Tax
permanently reduced from
50% to 0%
Introduction of new
basin-wide
Investment Allowance
£40m for new
geophysical surveys
HMT launched
discussion
paper and
expert panel
on tax for late
life assets, to
report at
Autumn 2017
Budget
Supplementary
Charge reduced
from 32% to 10%
Source: Wood Mackenzie
Fiscal packages of £2.3bn introduced
during 2015/2016 in line with “Driving
Investment” principles
0%
20%
40%
60%
0%
30%
60%
90%
Angola Norway Indonesia Denmark Australia Gulf ofMexico
UK
Go
ve
rnm
en
t s
ha
re
Inte
rna
l Rate
of R
etu
rn
0.0
1.0
2.0
3.0
4.0
5.0
2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
Gas (bcf/d)
0.0
0.3
0.5
0.8
1.0
1.3
1.5
2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
Oil (mmbbl/d)
Slide 5
Performance turning around
0
0.5
1
1.5
2
2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050
Oil & Gas (mmboe/d) Yet-To-Find
Unsanctioned Discovered Resources
Unsanctioned Probable and Possible
Sanctioned Not Producing
Sanctioned Producing
Producing
Sanctioned
Producing
Sanctioned
• Production efficiency from 60% - 73%
• Incremental base projects
• New projects coming on production
Producing
Sanctioned
Unsanctioned (risked)
Small pools (risked)
YTF (risked)
Increasing production
Source: OGA
Stewardship Survey
Production increasing through improved
production efficiency & new developments
with considerable upside potential
02468
10121416
Slide 6
2016 Operator OPEX
Performance turning around
Managing cost
0
5
10
15
20
25
30
35
40
45 $
/bo
e
Majors
Non-Majors
2016 Average $15.7/boe
Actual
Forecast
2016 Unit Operating Cost
0
1,000
2,000
3,000
4,000
5,000
$b
n
2016 Total OPEX Breakdown
Facilities Wells Logistics Pipelines Terminals
5
4
3
2
1
$b
n
OPEX reduction through restructuring,
revised contracts and improved workforce
engagement & efficiency
Operators
$b
n
Annual Operating Costs
2014 Average $30/boe
Source: OGA
Stewardship Survey
0
5
10
15
20
25
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
UKCS Capital Expenditure
Investment
0.0
0.5
1.0
1.5
2.0
2.5
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
mm
bo
e/d
ay
Sanctioned Future Production
0
5
10
15
20
25
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Field Consents
$b
n
Peak investment at high oil prices,
active evaluation of a number of new
field applications
Gas
Condensate
Oil
Under evaluation
Base production
Actual
Forecast
Source: OGA
Stewardship Survey
Slide 8
Revitalizing exploration
CNS
WoS
NNS
SNS
YTF
6bnboe
SNS
NNS
CNS
WOS
SNS
Number of Wells
SNS
MM
bo
e
Seismic research in under-explored areas, release of
reports and data, new approach to licensing and
increased technical rigour
Other
Source: OGA
Stewardship Survey
12000 0
Unlocking small pools
mm
bo
e
Producing fields
Ongoing developments
Currently locked discoveries
10
100
1000
Subsea storage
Versatile Production Unit Spooled pipeline
Unmanned buoy
CNS
WoS
NNS
SNS
2.4
bnboe
Over 350 small pools, one of key focus areas
in next licensing round, with technology
being a key enabler
Slide 9
Other
Source: OGA
Stewardship Survey
Slide 10
29
Reducing decommissioning cost
Imp
rove d
eco
mm
issio
nin
g e
ffic
ien
cy
Cost certainty and reduction
• Benchmarking
• Standardisation of methods
• Sharing good practice
Delivery
Capability
• Learning from other industries
• Contracting & commercial strategies
• Changing behaviours
Regulatory Guidance
• Improve awareness
• Communicate requirements
• Develop tools e.g. cleaning
Well
Abandonment
• Campaign approach to well P&A
• E&A suspended well stewardship
• Pilot and upscale
10%-15%
Potential savings (not additive)
25%-35% 15%-20% 35%-45%
0.0
1.0
2.0
3.0
4.0
2010 2012 2014 2016 2018 2020
Annual Decommissioning
Spend
Target is to reduce decommissioning costs by 35%
from 2016 baseline estimate
$b
n
$60bn
Source: OGA
Stewardship Survey
Slide 11
Imp
rov
e d
eco
mm
issio
nin
g
eff
icie
nc
y
29 Decommissioning – Status Update
Decommissioning experience
Brent Murchison SNS
Estimated cost decreased over £1bn
over past 2 years
Work with supply chain: cost
reduction in topsides removal
Reduced well P&A costs: execution &
contracting strategy, efficiency
improvements
Learning transferable: Shell willing to
share
Lessons learned to help half cost of
future projects
2 years ahead of schedule, estimated
final cost 88% of sanction cost
Early engagement with contractors,
flexibility of schedule
Sharing/engagement with regulators,
peers and industry
Internal well P&A campaigns delivering
50% cost reductions
Multi-operator well P&A to further
reduce costs and share experiences
Optimisation of schedule and market
flexibility
Engaging with SNS peers/industry
Slide 12
29 Decommissioning – Status Update
Baseline supply chain turnover from exports
Potential increased gross production revenue
Deliver MERUK &
realise full hydrocarbon
potential of the UKCS
Expand service sector
range, market coverage,
& double exports
World class
competitiveness
The big opportunity
Vision is to increase the prize by
half again over the next 20 years
£420bn
£280bn
£350bn
£500bn
Reve
nu
e/T
urn
ove
r p
.a.
£b
n 2
01
6 p
ric
es
2035
2014
+ £150bn
+ £140bn
Potential increased supply chain turnover from exports
Baseline gross production revenue
Source: OGA
5
10
20
15
25
30
35
0
Thank you
Gunther Newcombe
Operations Director