Meeting the Challenge of Delivering Successful Projects 2017 Oil - - PowerPoint PPT Presentation

Meeting the Challenge of Delivering Successful Projects

2017 Oil and Gas Project Management Conference Gunther Newcombe Operations Director

October 2017

Outline

• Government Support
• OGA Approach
• Industry Examples
• Key Messages

Project Issues

Industry needs to change approach in order to optimise projects Cost and timing over runs Operator and supply chain relationships Pace Capital investment

Graphic3

Context

Limited new capital spend committed but a number of new projects being worked to sanction

Source: OGA

Government Support

Improve decommissioning efficiency

29

Fiscally Competitive

Petroleum Revenue Tax permanently reduced from 50% to 0% Introduction of new basin-wide Investment Allowance £40m for new geophysical surveys £5m Exploration data/studies HMT launched discussion paper and expert panel

• n tax for late

life assets, to report at Autumn 2017 Budget Supplementary Charge reduced from 32% to 10%

Source: Wood Mackenzie

0% 20% 40% 60% 0% 30% 60% 90%

Angola Norway Indonesia Denmark Australia Gulf of Mexico UK

Government share Internal Rate of Return

Fiscal packages of £2.3bn introduced in 2015/2016 in line with “Driving Investment”

Allowance Simplification

Over 350 undeveloped discoveries and a key focus area of 30th Round

Allowances simplified to Investment Allowance (IA)

• Small fields
• Ultra high pressure / high

temperature fields

• Ultra heavy oil fields
• Remote deep water gas fields
• Deep water fields with

sizeable reserves

• Large shallow water gas fields
• Brown field allowance (BFA)

Allowances before Autumn statement 2014

HMT simplified

• Cluster Area

Allowance

(Introduced December 2014)

• Investment Allowance

(Introduced April 2015)

Current Allowances

30% 40%

With IA Without IA

a fixed amount per field proportionate to investment expenditure

Government Take

Over 350 undeveloped discoveries and a key focus area of 30th Round

Examples of technology Government revenues significantly reduced in future

Source: OGA/HMRC

OGA Approach

OGA correcting by testing assumptions independently

Price assumption misalignment

Disconnect between buyer and seller’s assumptions and evaluation OGA flexible and enforcing MER UK Strategy

Assets in right hands

Licensees not investing or realising potential Infrastructure Code of Practice underpinned by powers to impose terms

Access to infrastructure

Third parties cannot gain access or access

• n reasonable terms

OGA clarifying area hubs or strategy synergies to help optimise asset packages

Divestment packages

Do not necessarily ensure that assets are in the right hands OGA working with investment community to promote new

• pportunities and

discuss new financing models

Lack of capital

Traditional funding models not available HMT has published a paper

• n how tax can

support transfers

• f late-life assets

UKCS fiscal regime

Tax system may be deterring sales of assets close to decommissioning OGA assisting where required; standardised agreements and processes will help

JOA structure misalignment

Lack of sole risk provisions, pre- emption rights, and financial capability concerns OGA to issue cost norms and benchmarking; standardised DSAs needed

Decommissioning

Cost uncertainty & lack

• f DSAs cause deal

delay

Removing Barriers

Over 350 undeveloped discoveries and a key focus area of 30th Round

Over $8bn invested in UKCS M&A during 2017

Project Learnings

Over 350 undeveloped discoveries and a key focus area of 30th Round

ECITB, OGUK and industry working together to produce project guidance

March 2017

• 11 diverse major projects reviewed in detail by

OGA, operators and Tier 1 contractors

• No relationship between project size/complexity

and outcome

• Key finding is that leadership and behaviours are

critical for success

• OGA will continue to work with industry using asset

stewardship processes to ensure learnings are transferred and MER UK maximised

SE-05 Robust Project Delivery

• Deliver projects as per cost/schedule at project sanction or decommissioning programme
• Project needs to demonstrate competitiveness and robustness and identify challenges

Indicators to Assess Delivery Outcomes

• Accountable leadership
• Dedicated delivery organisation in place
• Stage gate or check point project system in place
• Benchmarking assessment prior to investment:
• Documented evidence that MERUK considered:-
• New infrastructure optimally configured
• Utilise existing infrastructure
• Re-use of existing assets (3rd party)
• Encourage sufficient front end preparation
• Ensure delivery of main project parameters
• Improve predictability of project delivery

assessed against previous projects

• Drive efficiency and reduce development costs
• To directly support MER UK strategy
• OGA will judge a project using delivery

milestones, not the processes to deliver it

Stewardship Expectations set out good practice for operators

Supply Chain Action Plans

SCAP process facilitates and demonstrates that

• perators are:

MER UK Strategy

Legally binding

• bligations

Field Development Plan / Decommissioning Programme

All projects requiring an FDP/DP should produce a SCAP

Stewardship Expectations

Tier 1 contractors should complete SCAPs for projects >£25m

SE-05 Robust project delivery SE-10 Planning for decommissioning

Innovation Quality Engagement Trust

Evaluation Criteria

Over 350 undeveloped discoveries and a key focus area of 30th Round

Currently being piloted by 3 companies and will form part of revised FDP and DP requirements

Field Development Plans

Over 350 undeveloped discoveries and a key focus area of 30th Round

Revised OGA FDP Guidance will be issued in 4Q 2017

Assessment Execute HSE

Project Kick-Off Concept Select Draft FDP Final FDP D&P Consent Issued First Oil

Authorisation

Consultation on Project Execution Plan Development Options Evaluation EOR Screening Consultation on SCAP FEED & PEP Determination Field Operator Approval Host Facility Addendum UUOA

Supply Chain Action Plan Monitor Project Execution

Commissioning Consents Issued PWA

OGA

Environmental Statement Preparation Environmental Statement Consultation Design or Relocation Notification Review Decommission Security arrangements agreed

BEIS

Safety Case Accepted by OSDR

MILESTONES

Small Pools Initiative

mmboe

Producing fields Ongoing developments Currently locked discoveries

10 100 1000

Over 350 undeveloped discoveries and a key focus area of 30th Round

Remaining reserves Examples of technology Over 3bnboe in discovered resource with over 150 small pools offered in 30th Round

Industry Examples

Project Partnership

Different operator mind-set and way

• f working

SURF/SPS functional tender rather than price tender Collaborative Contractor Club no bespoke solutions – all price competitive Baker Hughes/GE a fully integrated solution Redeploy FPSO – best fit solution Investment giving senior banks confidence

Unlocking the Cheviot Field (Block 2/10b, 2/15a, 3/11b)

Cheviot

Alpha Petroleum working in partnership with GE and Baker Hughes to develop Cheviot

75mmboe with 18 firm wells delivering 30,000boep/d with first oil 2019

Project Funding

Innovative funding model by Premier enabling Tolmount development to proceed

Different operator mind-set and way

• f working

CATS Management Ltd and Dana Petroleum fund portion of platform and export line Tariff payments once production commences based on minimum rate Modifications to Dimlington Terminal also covered in the deal Feed in progress with sanction 1H 2018 Tendering for platform, pipeline and Drilling rig to start soon

4 initial wells delivering 300mmscfg/d with first gas 2020

540bcf 250bcf

Project Pace

Apache fast track of Callater from discovery to first oil in less than 2 years

Well completed May 2017 CB2 online July 2017

Key Messages

• Government and OGA framework in place
• Learnings are out there to be shared
• Leadership and behaviour are key to success
• Encouraging signs that culture is changing

Industry needs to change approach in order to optimise projects