Open letter from the OGA to licensees and infrastructure owners to outline the next stage of our regulatory approach
On 4 June 2019, Tom Wheeler, the OGA's Director of Regulation, wrote to all licenees and infrastructure owners regarding the next stage of our regulatory approach. The text of the letter is highlighted below:
Maximising Economic Recovery and Regulatory Requirements
The Maximising Economic Recovery Strategy for the UK is binding on all operators, licensees and infrastructure owners working in the UKCS and the OGA.
The OGA has been in action since day one, promoting, influencing and, where necessary, regulating the industry to drive MER UK. Through that time we have seen an impressive rejuvenation of the UKCS, with the OGA’s production projections to 2050 now 3.9 billion barrels of oil equivalent (boe) more than projected in March 2015. Much of this success is the result of excellent initiatives driven by industry, and likewise the OGA has catalysed many performance improvements and new ways of working. However, we have seen and still see a number of examples of behaviour that threaten MER UK or that otherwise indicate a lack of awareness of the obligations imposed by the MER UK Strategy.
Action to date
To date our approach has been incremental: gradually increasing the intensity and seriousness of interventions as issues become critical, or drag on for too long. We call this process “measured escalation”.
Since the start of 2017, the OGA has intervened to resolve 56 separate cases, each of which had the potential to impact MER UK. The chart below illustrates the level of intervention required to resolve each case.
While in only a minority of cases have we used our powers, from the point of “Enhanced Facilitation” onwards, we are clear about our expectations and the potential consequences of not working constructively with the OGA and partners to find a solution. There are numerous other cases we are actively working today in the same way.
A large majority of operators, licensees and infrastructure owners have responded well to this approach, making substantial changes to align their businesses to the requirements of the MER UK Strategy.
Evolution of approach
The OGA is grateful to those companies who continue to engage constructively with us. However, big opportunities, and challenges, remain. Despite good progress we still see too many issues taking too long to resolve or ending up in deadlock between disputing parties, threatening MER UK. Therefore, to help embed the new culture, and to ensure that any companies not onboard do not profit, at the expense of the majority, we will be progressively more proactive in using the OGA’s powers.
This is not a dramatic change; however we do expect to take on more cases and we will be more transparent about the work that we are doing.
In particular, the OGA will take the following steps:
- use the new “Enquiry Guidance”, providing flexibility as to the powers used in each case, including alternative dispute resolution;
- progress issues through measured escalation more quickly, particularly those impacting the strategic priorities;
- increase transparency around our use of regulatory powers and where appropriate use thematic reviews; and
- refresh the stewardship expectations (including adding a new one on commercial behaviours) and publish a regulatory requirement (consents and authorisations and basic licence management).
These steps should further help drive the right outcomes for MER UK. The OGA will never intervene for the sake of it. Wherever possible we will continue to use our measured escalation process, clearly setting out our expectations and intentions, and giving those affected a chance to address the issues. When we do intervene, we will be proportionate and guided by evidence.
We would ask that you continue to ensure that you and your company fully understand the obligations in the Strategy, highlight possible problem areas, and, where the OGA does intervene, that you engage positively and constructively with us.
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