2009 ACTIVITY & REGULATORY UPDATE

Simon Toole

Energy Development UnitDepartment of Energy and Climate Change

9 Dec 2009

Outline of presentation

• Recent Activity and Discoveries• 26th Licence Round• Interactions with Offshore Wind Power• 2nd Round Licence Extension Policy• Carbon Capture and Storage• EOR• Infrastructure & Commercial Codes of Practice• Data Management• Promote CD Opportunities

• Around 40 billion barrels of oil equivalent produced so far

• Anticipate around 20 billion remain• Some 300 offshore fields in

production• Supplies around 70% of UK energy

needs• Supports around 450,000 jobs

across the sector• Attracts around £12bn annual

expenditure by industry• Provides around £10bn annually to

the Treasury in taxation

UK Continental Shelf

< 200

200 - 300

>400

2002 03 04 05 06 07 08 09

Mmboe/yr

Recent Oil and Gas Discoveries

Initiative Success

Promote Licences• 41 E&A wells• 18 published successes

Fallow• 107 E&A wells on Fallow acreage since 2002

Promote UK• Uptake of 163 out of 188 undeveloped discoveries and leads promoted on DECC CD /Website

WEST OF SHETLAND

Government/Industry taskforce collaborative outcome third party investment process

basic engineering nears completion

investment decision for pipeline next year ?

Licensees & New Entrants 2001-2009

Licensing • 26th Round – Early 2010

• Cumulative AcreageIncl. SEA 8

• Focussed TermsTraditional, Promote, Frontier

• New ‘West of Scotland

Frontier’ licence

• Residual 25th Round awards

decision - next few weeks

7

8

6

5

4

3

2

2

1

LARRY – Licensing Applications Repository

• Plan to introduce for 26th Round• Will automatically guide applicants on how to

submit an application electronically• Appendix A & C ‘Fill the box’ - Copy and Paste

or upload file technique• Appendix B (technical section) upload as a

complete pdf (or similar) file

Wind Farm Licences

2nd Round Licence ‘Prospective Area’ Extension Policy

• Licences due to expire November 2011• Recent clarification on licence trading of Prospective Areas

(see website)• DECC believes extensions only are appropriate where

current licensee is already engaged on a programme of work leading to development

• Do not support the case for late asset sales and possible development by third parties

• In such cases we would rather see fair and open competition via Licence Rounds, even if this means more time will be needed.

Carbon Capture and Storage• Act sets out general legal framework for storage. • Exclusive rights will be conferred by Crown Estates lease.• Interaction between overlapping Petroleum and Storage

licenses– Producing fields will be able to obtain exclusive rights for a subsequent

storage project.– Other situations will be generally open to competition.

• Draft regulations (under consultation until end of year) transpose EU directive and provide detailed rules for issued licences.

• Envisage ‘exploration’ and ‘storage’ phases.• Target for regulations – April 2010

EOR Size of the Prize

Offshore EOR Challenges

• Expensive facilities upgrades needed on ageing platforms

• Limited “window-of-opportunity” for mature fields / high well spacing

• EOR increment often “long & lazy”

• Need source of cheap EOR injectant

Fair access to Infrastructure

• Clarification of how DECC would set a tariff if asked – cost/risk/return balance: target as if competition exists

• Re-launched ‘Code of Practice’ – Sept 2004

• Greater Transparency on tariffs & terms

• Upfront agreement that BERR will facilitate and may set tariff & terms if no agreement after 6 months

• Status

• Several ‘6 month Automatic Referral Notices’ active

• Revised Guidance issued 2008/09

Progress with Commercial Code

• Annual survey originally showed improvement but recent levelling off

• Minister’s letter (Jan09) set challenges– Confirm support for Codes of Practice– MDs to set direction & identify issues– Use of available standard agreements– Following up with companies

Good Seismic Data Management

• Seismic Release Guidelines – DECC and OGUK web site• Distributed Data Repository model • Obligation to manage and keep data in good condition – 9

track in a cave is not good!• Relief of ‘inperpetuity’ obligation if put data in NHDA• CDA now have their Seismic Data Store available• Planning to recruit an ‘Enforcer’ – keeping better track of

seismic ownership will be key objective• We will be working with DEAL to ensure data due for release

at end of this year is properly flagged ahead of the 26th Round

Opportunities and Relinquishment Reports

45 Leads & 6 Discoveries (CD)

146 Relinquishment Reports (DECC web site)

Positive Outlook• Continued investment and activity• Substantial Discoveries• Wide range of North Sea players• Maximising full exploration potential• New approaches / Innovative thinking• UKCS remains strongly competitive• Production through to 2030 and beyond