Improvements made to UKCS project delivery but more work needed, OGA reports
The UK oil and gas industry has made significant improvements to project delivery performance and budget overspend, according to the Oil and Gas Authority (OGA), who today unveiled their ‘2018 UKCS Projects Insights Report’. The report presents UKCS capital projects’ recent performance (2018) and compares it to past performance (2011-2016). It also offers an insight into the future project portfolio.
Key findings show that in 2018:
- 60% of projects were delivered on time compared with 25% for pre-2017 figures
- Overspend on estimated budgets reduced from an average of 35% for pre-2017 to 10% in 2018
- Average Unit Development Cost (UDC) has reduced by nearly 60% from pre-2017 figures to £8/boe in 2018
- £3.9 billion capital expenditure (CAPEX) has been approved for 20 recently consented developments with 60 projects currently being worked on by operators over next 5 years
The OGA fully supports the energy transition, welcomes the government’s legally binding commitment to net zero emissions by 2050, and recognises there could be concerns about new projects in this context. However, oil and gas will remain an important part of our energy mix for the foreseeable future, including under net zero scenarios, where the UK is still expected to be a net importer. As such, managing the declining production and maximising the economic recovery from the UK remains vital to meet those energy demands as long as they exist, and to reduce reliance on hydrocarbon imports.
In July 2019, the OGA launched the refreshed Stewardship Expectation 5 which focuses on Robust Project Delivery. It outlines the range of ways in which the OGA engages with operators regarding project delivery, including Tier Reviews, performance benchmarking and outputs from the Annual UKCS Stewardship Survey.
Additionally, the OGA’s introduction of Supply Chain Action Plans (SCAPs) in January 2018 has been considered a catalyst in creating a collaborative relationship between operators and supply chain when working on capital projects.
Glenn Brown, Operations Coordination Manager at the OGA said: “Industry has worked hard in recent years to meet deadlines and budgets for capital projects by improving planning and processes, sharing learnings and collaborating more and there has been real progress. I would urge industry to build on these learnings and, also, to work even more collaboratively with the supply chain.”
Included within the report is a number of case studies including the Total Culzean project which is an example of how robust planning and effective work with suppliers can help to reduce capital costs. Jean-Luc Guiziou, Managing Director at Total E&P UK said: “Total completed the Culzean project in June 2019. It represented four years work across both UK and international supply chains that culminated in Culzean’s safe start-up in the North Sea earlier this year. Completing Culzean on schedule and under budget was a great achievement for Total’s project team, it also highlights the improved delivery performance now available to the offshore industry across the UK Continental Shelf.”
The report also features a case study of the Apache Garten project. Jon Graham, Region Vice President – North Sea for Apache said: “The Garten project is an excellent example of Apache’s strategy in the North Sea to focus exploration activity near operated facilities and leverage existing infrastructure. The pace of this project would not have been possible without the skills and expertise we have within our team and close collaboration with companies in our supply chain.”
The OGA would like to thank the operators who contributed to the report.
Notes to editors:
- The 2018 UKCS Project Insights report is available here.
- Comparisons are made with ‘Lessons Learned from UKCS oil and gas projects 2011-2016’ published by the OGA in 2017. This report is available here.
- In July 2019 the OGA launched revised Stewardship Expectations which promote industry good practice and support maximum economic recovery (MER). They aim to further stimulate upstream activity, maintain and support performance improvements while continuing to maintain high standards of safety and environmental management.
- In January 2018 the OGA introduced the requirement for Supply Chain Action Plans (SCAPs) which requires operators to develop effective action plans in respect of all new projects including decommissioning activities.
- A video about the report is available here.
For further information please contact:
Oil and Gas Authority
Tel: +44 (0) 300 020 1072
Gunther Newcombe, Director of Operations at the OGA, discusses the findings of the reportKeep me informed