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25 June 2018
OGA released updated guidance on planning and gaining consent to UKCS field developments on 17 May 2018. It has significantly revised and expanded the previous guidance (from May 2016) to reflect the implementation of the MER UK Strategy.
The guidance, 'Requirements for the planning of and consent to UKCS Field Developments' is intended to assist those involved in planning a new field development and in obtaining the consent required to proceed with a Field Development Plan ("FDP"). It has been created with the industry's input to try to achieve consistent and successful high quality and high value projects. An emphasis is made on early project planning and supply chain collaboration, including the use of Supply Chain Action Plans (SCAPs).
The guidance document covers the following main areas:
A summary of the last four processes is included below.
A total of fifteen new developments worth £15 billion in capital are reportedly in progress across the UKCS, expected to produce approximately 1.5 billion boe over the life of the fields. Further development opportunities may also be imminent, with OGA currently considering fifty projects.
The updated guidance document can be found here.
This is where decisions are expected to be made by licensees on strategies and project concepts. Alternative development strategies should be evaluated by the licensees and a preferred development concept identified ("Concept Select"). Decisions should be based on appropriate technical information, in line with the Stewardship Expectations SE-02 (Exploration and Appraisal Subsurface Work Programme) and SE-03 (Optimum Use of Subsurface Data).
Early on in the Assessment Phase, OGA and the Field Operator should communicate with each other. Once the decision has been made on the development concept, the Field Operator should provide a Concept Select Report to OGA that outlines the information that led to the decision. OGA will work with Licensees to ensure that the development option agreed is that which is most likely to secure the maximum value of economically recoverable petroleum from the strata beneath UK waters. OGA considers the economics of field developments as part of the assessment of FDPs. Operators must therefore include details of the project economics – including the various development options being considered – within the Concept Select Report in the format of the Standard Economics Template. MER UK is achieved when a development maximises the net present value (NPV) of economically recoverable petroleum from the UKCS, taking into account the effect on recovery from other fields and the impact on infrastructure. In ranking options, OGA will focus on pre-tax NPVs calculated using an appropriate discount rate (currently, 10 per cent real), excluding costs such as capital repayment and the costs of financing.
When reviewing new field development proposals which have implications for future infrastructure utilisation OGA will evaluate if the proposals support the MER UK Strategy, which may include:
For most offshore fields, it is expected that Licensees will put forward a plan covering the lifecycle of the development. OGA recognises that there may be valid reasons for more gradual or flexible approaches to some developments stemming from geological or engineering uncertainty, infrastructure constraints or the benefits of phasing expenditure. OGA will support such approaches where consistent with the fulfilment of the principal objective of MER UK. The alternatives to full lifecycle developments that are commonly proposed include Extended Well Test, Phased Development and Satellite Tie-back and these are all addressed in the guidance. The guidance also considers aspects of good oilfield practice including with regard to gas venting/flaring and measurement of hydrocarbons.
A draft SCAP will be required and a project execution plan (PEP) should also be developed to ensure a robust project is developed with clear scope, cost estimate, schedule and commercial terms (in line with the Stewardship Expectation implementation guides relevant to field developments, in particular SE-05 (Robust Project Delivery). The Operator will also need to consider how use of technology might assist the development and carry out screening for suitability for Improved Oil Recovery/Enhanced Oil Recovery (IOR/EOR).
When OGA agrees with the licensee on the Concept Select decision, this will conclude the Assessment Phase.
This Phase is where all relevant Licensee and regulatory approvals are secured. This Phase will most likely lead to a decision by the licensees to invest in the project ("FID"), and consent to the FDP provided by OGA.
An early version of the FDP should be shared with OGA - this should provide a clear explanation of the commitments that the Licensees are making (in terms of facilities, number of wells, provision for IOR/EOR, provision for third party access hydrocarbon export routes etc.) to bring forward a sound development, rather than a detailed technical description of the subsurface reservoir or required infrastructure. The actual form of the development and the basis for field management should be described and sufficient detail will be required to permit development and production performance to be measured.
After taking account of OGA comments, a finalised FDP, finalised SCAP and updated PEP should be submitted along with in the case of a satellite tie-back, appropriate confirmations from the Host Facility. If the guidance is followed it is expected that only minor changes to the draft FDP would be required in order to reach its final form.
The development will normally be consented to once the OGA is satisfied of the following:
Where the process in the guidance is followed correctly, it is expected that a Development and Production Consent would normally be issued by OGA within one month of submission of the final FDP document. For all fields both upper and lower limits to production levels will be included in the Production Consent. These will usually be based on the maximum and minimum cases as stated in the FDP. Charges are payable for the approval of an FDP.
This project phase is where the FDP scope and Project Execution Plan will be implemented by the Field Operator. Once consent has been provided by the OGA, all licensees party to the development are committed to the project. Well construction, engineering, procurement, construction and commissioning will be carried out during this Phase. The FDP and PEP will include a project schedule including major decision points and milestones as well as permitting requirements. As part of the PEP the Field Operator should also discuss and agree an engagement plan with the OGA. During the Execute Phase, progress against the project schedule should be monitored and deviations from the planned schedule should be reported to the OGA. During this phase the Operator must obtain flaring consents, a pipeline works authorisation and approval of its safety case.
Once consent has been provided to an FDP, it is expected the project will continue in accordance with that plan and the Project Execution Plan. The OGA should be informed of any changes as a FDP Addendum may be required. An environmental assessment may be required under the Offshore Petroleum (Assessment of Environmental Effects) Regulations 1999.
For further information on this topic please contact Valerie Allan or Judith Aldersey-Williams at CMS Cameron McKenna Nabarro Olswang LLP by telephone (+44 1224 62 20 02) or email (firstname.lastname@example.org or email@example.com). The CMS Cameron McKenna Nabarro Olswang LLP website can be accessed at cms.law.
This update has been reproduced in its original format from Lexology – www.Lexology.com.
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