Presentation on theme: "PP/32/01 PD/st0601_4.PPT "Progressing Partnerships Operators-DTI" Why are we concerned? Short term activity is improving but basin is mature, finds are."— Presentation transcript:
PP/32/01 PD/st0601_4.PPT "Progressing Partnerships Operators-DTI" Why are we concerned? Short term activity is improving but basin is mature, finds are smaller exploration levels low and managers risk adverse many prospects and discoveries not material to all licensees little incentive to turnover inactive licence holdings barriers to new players commercial behaviours learnt in different setting
PP/32/01 PD/st0601_4.PPT "Progressing Partnerships Operators-DTI" These conditions allow: deep rooted, persistent, misalignments within partnerships and between partnerships low expectations of what can be achieved protracted negotiation and completion of transactions and ample opportunity for collapse loss of momentum quality second and third tier operators avoiding the UKCS
PP/32/01 PD/st0601_4.PPT "Progressing Partnerships Operators-DTI" Evolution If left the UKCS will evolve and better practices will develop but without pressure this evolution will be slow and wasteful economic oil will be left in the ground Low oil price was driving this evolution faster, see it as the job of this workgroup to keep the pressure up.
PP/32/01 PD/st0601_4.PPT "Progressing Partnerships Operators-DTI" The DTI wants to see licences in the hands of those best able to maximise the wealth creation. Specifically our targets for the workgroup are: Eliminate pre-emption Binding code of practice for negotiation and settlement Licences relinquished after 4 years without drilling/development approval.
PP/32/01 PD/st0601_4.PPT "Progressing Partnerships Operators-DTI" Accelerating evolution DTI has a number of ways to help industry towards these targets: reward good performance by the use of discretionary licence powers reward good performance by the award of new licences reward good performance by extending licence terms of producing fields use mc powers to require exploration drilling and development activity only where licensees have failed to perform revise licence regime
PP/32/01 PD/st0601_4.PPT "Progressing Partnerships Operators-DTI" " We believe that it is a necessary part of depletion controls that the Secretary of State should be able to require a licensee to submit a programme....otherwise, the licensee could sit upon a commercially exploitable discovery and the nation would lose the benefit of these reserves. This may be an unlikely scenario in most cases because normally it is in the licensee's interests to produce as quickly as possible. It is possible that [the licensee's] interests might coincide with that of the nation. But that might not always be the case. There might be cases where his interest diverged from the national interest. Therefore we think it is important that the Secretary of State should have this power to require, through the programme, the licensee to exploit the find." John Smith MP, House of Commons, 8 July 1975
PP/32/01 Barriers to Development 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 Reserves Subsurface Technical issues Well delivery (Flow rates) Infrastructure Development costs Drilling Development costs Distance from infrastructure Commercial-Third Party Issues Transportation costs Oil and gas prices Number of operators/partners Access to infrastructure Fluids - Technical issues Gas Market Global competition for funds Surface Technical issues Subsurface-Insufficient staff resource Surface - Insufficient staff resources Political - Third Party Issues Environmental - Third Party Issues Access to data (e.g. tight hole) "Progressing Partnerships Operators-DTI" PD/st0601_4.PPT * * * * * * ?