Improvements made to UKCS project delivery but more work needed, OGA reports

Source: press release, 1 November 2019

illustration: OGA
illustration: OGA

The UK oil and gas industry has made significant improvements to project delivery performance and budget overspend, according to the Oil and Gas Authority (OGA), who has unveiled the 2018 UKCS Projects Insights Report. The report presents UKCS capital projects’ recent performance (2018) and compares it to past performance (2011-2016). It also offers an insight into the future project portfolio.

Key findings show that in 2018:

  • 60% of projects were delivered on time compared with 25% for pre-2017 figures.
  • Overspend on estimated budgets reduced from an average of 35% for pre-2017 to 10% in 2018.
  • Average Unit Development Cost (UDC) has reduced by nearly 60% from pre-2017 figures to GBP 8/boe in 2018.
  • GBP 3.9 billion capital expenditure (CAPEX) has been approved for 20 recently consented developments with 60 projects currently being worked on by operators over next 5 years.

The OGA fully supports the energy transition, welcomes the government’s legally binding commitment to net zero emissions by 2050, and recognises there could be concerns about new projects in this context. However, oil and gas will remain an important part of our energy mix for the foreseeable future, including under net zero scenarios, where the UK is still expected to be a net importer. As such, managing the declining production and maximising the economic recovery from the UK remains vital to meet those energy demands as long as they exist, and to reduce reliance on hydrocarbon imports.

In July 2019, the OGA launched the refreshed Stewardship Expectation 5 which focuses on Robust Project Delivery. It outlines the range of ways in which the OGA engages with operators regarding project delivery, including Tier Reviews, performance benchmarking and outputs from the Annual UKCS Stewardship Survey.

Additionally, the OGA’s introduction of Supply Chain Action Plans (SCAPs) in January 2018 has been considered a catalyst in creating a collaborative relationship between operators and supply chain when working on capital projects.

Glenn Brown, Operations Coordination Manager at the OGA says, “Industry has worked hard in recent years to meet deadlines and budgets for capital projects by improving planning and processes, sharing learnings and collaborating more and there has been real progress. I would urge industry to build on these learnings and, also, to work even more collaboratively with the supply chain.”

Included within the report is a number of case studies including the Total Culzean project which is an example of how robust planning and effective work with suppliers can help to reduce capital costs. Jean-Luc Guiziou, Managing Director at Total E&P UK says, “Total completed the Culzean project in June 2019. It represented 4 years’ work across both UK and international supply chains that culminated in Culzean’s safe start-up in the North Sea earlier this year. Completing Culzean on schedule and under budget was a great achievement for Total’s project team, it also highlights the improved delivery performance now available to the offshore industry across the UK Continental Shelf.”

The report also features a case study of the Apache Garten project. Jon Graham, Region Vice President – North Sea for Apache says, “The Garten project is an excellent example of Apache’s strategy in the North Sea to focus exploration activity near operated facilities and leverage existing infrastructure. The pace of this project would not have been possible without the skills and expertise we have within our team and close collaboration with companies in our supply chain.”

The 2018 UKCS Project Insights Report is available here.