Meeting the Challenge of Delivering Successful Projects

Transcription

1 Meeting the Challenge of Delivering Successful Projects 2017 Oil and Gas Project Management Conference Gunther Newcombe Operations Director October 2017

2 Outline Government Support OGA Approach Industry Examples Key Messages

3 Project Issues Cost and timing over runs Operator and supply chain relationships Capital investment Graphic3 Pace Industry needs to change approach in order to optimise projects

4 Context Source: OGA Limited new capital spend committed but a number of new projects being worked to sanction

5 Government Support

6 Government share Improve decommissioning efficiency Fiscally Competitive 40m for new geophysical surveys 5m Exploration data/studies 90% 60% Introduction of new basin-wide Investment Allowance Supplementary Charge reduced from 32% to 10% Petroleum Revenue Tax permanently reduced from 50% to 0% HMT launched discussion paper and expert panel on tax for late life assets, to report at Autumn 2017 Budget 60% 30% 0% Angola Norway Indonesia Denmark Australia Gulf of Mexico UK 40% 20% 0% Internal Rate of Return Source: Wood Mackenzie Fiscal packages of 2.3bn introduced in 2015/2016 in line with Driving Investment 29

7 Allowance Simplification Allowances before Autumn statement 2014 Small fields Ultra high pressure / high temperature fields Current Allowances With IA Without IA Ultra heavy oil fields Remote deep water gas fields HMT simplified Cluster Area Allowance (Introduced December 2014) 30% 40% Deep water fields with sizeable reserves Investment Allowance (Introduced April 2015) Large shallow water gas fields Brown field allowance (BFA) proportionate to investment expenditure a fixed amount per field Over 350 undeveloped Allowances discoveries simplified and to Investment a key focus Allowance area of 30 th (IA) Round

8 Government Take Examples of technology Over 350 undeveloped Government discoveries revenues and significantly a key focus reduced area of in 30 th future Round Source: OGA/HMRC

9 OGA Approach

10 Removing Barriers Assets in right hands Licensees not investing or realising potential Access to infrastructure Third parties cannot gain access or access on reasonable terms Price assumption misalignment Disconnect between buyer and seller s assumptions and evaluation Lack of capital Traditional funding models not available JOA structure misalignment Lack of sole risk provisions, preemption rights, and financial capability concerns Divestment packages Do not necessarily ensure that assets are in the right hands Decommissioning Cost uncertainty & lack of DSAs cause deal delay UKCS fiscal regime Tax system may be deterring sales of assets close to decommissioning OGA flexible and enforcing MER UK Strategy Infrastructure Code of Practice underpinned by powers to impose terms OGA correcting by testing assumptions independently OGA working with investment community to promote new opportunities and discuss new financing models OGA assisting where required; standardised agreements and processes will help OGA clarifying area hubs or strategy synergies to help optimise asset packages OGA to issue cost norms and benchmarking; standardised DSAs needed HMT has published a paper on how tax can support transfers of late-life assets Over 350 undeveloped Over $8bn discoveries invested and in UKCS a key focus M&A area during of th Round

11 Project Learnings March diverse major projects reviewed in detail by OGA, operators and Tier 1 contractors No relationship between project size/complexity and outcome Key finding is that leadership and behaviours are critical for success OGA will continue to work with industry using asset stewardship processes to ensure learnings are transferred and MER UK maximised Over ECITB, 350 OGUK undeveloped and industry discoveries working and together a key focus to produce area of 30 th project Roundguidance

12 SE-05 Robust Project Delivery Deliver projects as per cost/schedule at project sanction or decommissioning programme Project needs to demonstrate competitiveness and robustness and identify challenges Indicators to Assess Delivery Accountable leadership Dedicated delivery organisation in place Stage gate or check point project system in place Benchmarking assessment prior to investment: Documented evidence that MERUK considered:- New infrastructure optimally configured Utilise existing infrastructure Re-use of existing assets (3 rd party) Outcomes Encourage sufficient front end preparation Ensure delivery of main project parameters Improve predictability of project delivery assessed against previous projects Drive efficiency and reduce development costs To directly support MER UK strategy OGA will judge a project using delivery milestones, not the processes to deliver it Stewardship Expectations set out good practice for operators

13 Supply Chain Action Plans SCAP process facilitates and demonstrates that operators are: MER UK Strategy Legally binding obligations Evaluation Criteria Field Development Plan / Decommissioning Programme All projects requiring an FDP/DP should produce a SCAP Engagement Trust Stewardship Expectations SE-05 Robust project delivery Tier 1 contractors should complete SCAPs for projects > 25m SE-10 Planning for decommissioning Innovation Quality Currently being Over piloted 350 undeveloped by 3 companies discoveries and will and form a key part focus of revised area of 30 FDP th Round and DP requirements

14 Field Development Plans Assessment Authorisation Execute Consultation on SCAP Supply Chain Action Plan Monitor Project Execution OGA Consultation on Project Execution Plan Development Options Evaluation FEED & PEP Determination UUOA Field Operator Approval PWA Commissioning Consents Issued EOR Screening Host Facility Addendum BEIS Environmental Statement Preparation Environmental Statement Consultation Decommission Security arrangements agreed HSE Design or Relocation Notification Review Safety Case Accepted by OSDR MILESTONES Project Kick-Off Concept Select Draft FDP Final FDP D&P Consent Issued Over 350 undeveloped Revised OGA discoveries FDP Guidance and a key will focus be issued area of in 30 4Q th Round 2017 First Oil

15 mmboe Small Pools Initiative Remaining reserves Examples of technology Producing fields Ongoing developments Currently locked discoveries Over Over 3bnboe 350 in undeveloped discovered discoveries resource with and over a key 150 focus small area pools of 30 th offered Roundin 30 th Round

16 Industry Examples

17 Project Partnership Unlocking the Cheviot Field (Block 2/10b, 2/15a, 3/11b) Different operator mind-set and way of working Cheviot SURF/SPS functional tender rather than price tender Collaborative Contractor Club no bespoke solutions all price competitive Baker Hughes/GE a fully integrated solution Redeploy FPSO best fit solution Investment giving senior banks confidence 75mmboe with 18 firm wells delivering 30,000boep/d with first oil 2019 Alpha Petroleum working in partnership with GE and Baker Hughes to develop Cheviot

18 Project Funding Different operator mind-set and way of working 250bcf 540bcf CATS Management Ltd and Dana Petroleum fund portion of platform and export line Tariff payments once production commences based on minimum rate Modifications to Dimlington Terminal also covered in the deal Feed in progress with sanction 1H 2018 Tendering for platform, pipeline and Drilling rig to start soon 4 initial wells delivering 300mmscfg/d with first gas 2020 Innovative funding model by Premier enabling Tolmount development to proceed

19 Project Pace CB2 online July 2017 Well completed May 2017 Apache fast track of Callater from discovery to first oil in less than 2 years

20 Key Messages Government and OGA framework in place Learnings are out there to be shared Leadership and behaviour are key to success Encouraging signs that culture is changing Industry needs to change approach in order to optimise projects