OGA’s ‘use it or lose it’ warning to stagnant North Sea operators

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A ‘use it or lose it’ warning has been issued as it emerged a number of top operators don’t have North Sea drilling plans.

At an industry event yesterday at the AECC, the Oil and Gas Authority said four of the top 23 operators in the basin have no intention to drill over the next three years.

It comes as the regulator said drilling needs to “roughly double” in order to extend the life of the basin and ensure the North Sea supply chain remains strong.

Chief Executive Andy Samuel argued there’s now “no excuse” to not invest, given the more stable oil price.

He said: “We know that four of the top 23 operators have no drilling plans for the next three years. We need to sit down with them, understand why that is. We don’t think it’s because of a lack of opportunity.

“Ultimately, if they don’t want to invest, it may lead to a use it or lose it type of conversation.

“The oil price is now at a level where there is no excuse not to invest and therefore those who don’t want to invest can expect us to be tapping on their shoulder, having a use it or lose it conversation which should be relatively straightforward given MER (maximising economic recovery) UK is a legally-binding obligation on operators.

“But, I’d much rather people feel the value themselves.”

Mr Samuel added that the OGA is working with operators to draw up “stewardship expectations” for oil and gas licenses, which will be published in Q1 of next year.

Sector leaders were gathering at the AECC for the launch of Oil and Gas UK’s 2018 economic report yesterday.

The report pressed the need for more drilling activity in order to support suppliers and extend North Sea production.

Mr Samuel also said making sure assets are in the right hands plays an important part in that, praising Shell’s sale assets to Chrysaor last year and similar moves being made by BP, Chevron and Total.

Shell’s UK upstream vice-president Steve Phimister said operators should make early decisions to develop their licenses or sell them to the right people.

He said: “You should make an early, conscious choice to develop it or let it go. But quite simply, why would you want to lose it when you could sell it to somebody else anyway?

“Let’s be economic about it, make a conscious choice. There’s no point in sitting on things and letting them fester.

“We have a plan, a strategy and a portfolio and we are investing behind it.

“Where we are not the right people to do that, we will actively make choices to put those assets in the right hands.

“You saw us do that last year with Chrysaor, you’ve seen other big operators like BP do that this year.

“You are seeing Total and Chevron start to do that. We are making active choices where we are going to invest in our portfolio and that’s right, but getting to a point where you are being forced to drop something, that doesn’t, make economic sense to me. That’s not rational.”