New Regulator for UK North Sea Oil and Gas Industry

Published at 12:02PM - 24/07/14

The British North Sea oil and gas industry is to have a brand new regulator. The Oil and Gas Authority (OGA) will receive a total of £15 million of government funding up to 2017. From that year it will be funded entirely by the oil and gas industry. The new regulator will be based in Aberdeen.

The OGA’s creation comes as the first practical step by the government following the publication in final form of the Wood Review in February this year. Entitled UKCS (United Kingdom Continental Shelf) Maximising Recovery Review Final Report, the 70-page report was written by the former Wood Group chairman Sir Ian Wood and provided a detailed analysis of the British oil and gas sector together with recommendations for future legislation,

The Wood Review recommended the creation of a new regulator, as the present one is inadequate to address all of the challenges of an increasingly complex industry.

The legislative framework for the new regulator is under preparation and the government will be recruiting an experienced chief executive and staff, says Energy Secretary Ed Davey.

The new regulator will take over all of the responsibilities of the Oil & Gas team currently working at the Department of Energy and Climate Change (DECC). This government department has been understaffed for decades. Its predecessor at the Department of Trade and Industry (DTI) had a staff of 90 supervising some 90 producing oil and gas fields. Today, the DECC’s team has a staff of 60 supervising over 300 producing fields.

Other North Sea oil-producing countries have far larger regulatory bodies. The Norwegian Petroleum Directorate has 220 employees, while the Netherlands regulator, Energie Beheer Nederland BV (EBN), has 100 employees.

Although the Wood Review’s remit was to analyse the offshore oil and gas sector, industry sources believes that eventually the new regulator will extend its reach to the onshore sector.

The Health & Safety Executive’s (HS&E) input into North Sea supervision remains the same.

The new regulator will have access to all technical and operating committee meetings of North Sea licence holders. There has been no state participation at such meetings since the privatisation of the former state oil company, British National Oil Corporation (BNOC), in the 1980s. Under the old system, BNOC held a 51 per cent share in all North Sea licences but was regarded by the oil industry as a financial liability and a disincentive to private-sector investment.

Once the new OGA is up and running, North Sea licensees will be obliged to provide considerably more public information, especially on producing fields.

The OGA will also have dispute-resolution powers. The North Sea is regarded internationally as one of the most difficult and legally adversarial oil-producing basins in the world. The OGA will have powers to resolve disputes over a stipulated time period by issuing non-binding recommendations.

The Wood Review also recommended that the oil industry takes one year to come up with proposals to simplify the legal and commercial complexities of the offshore contracting procedures.

Last updated on 11:27PM - 31/07/14