PD/st0601_4.PPT

1
"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

PD/st0601_4.PPT
2
"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

PD/st0601_4.PPT
3
"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.

PD/st0601_4.PPT
4
"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.

PD/st0601_4.PPT
5
"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

PD/st0601_4.PPT
6
"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
PD/st0601_4.PPT
7
"Progressing Partnerships Operators-DTI"
Barriers to Development
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Reserves
Gas Market
Oil and gas prices
Transportation costs
Access to infrastructure
Fluids - Technical issues
Surface Technical issues
Well delivery (Flow rates)
Drilling Development costs
Distance from infrastructure
Global competition for funds
Political - Third Party Issues
Subsurface Technical issues
Number of operators/partners
Access to data (e.g. tight hole)
Commercial-Third Party Issues
Infrastructure Development costs
Environmental - Third Party Issues
Surface - Insufficient staff resources
Subsurface-Insufficient staff resource

?





PD/st0601_4.PPT