MER UK in Practice

Exploration

Nick Richardson, Jenny Morris, Mike Davies and Nick Terrell

OGA regulatory framework

Regulatory framework underpins approach and priorities

Legislative Context

Supporting Obligations

Execution

Guidance

Sanction Notices

Statutory, Non-Statutory and Stewardship Expectations

Enforcement notice

Financial penalty notice

Operator removal notice

Licence revocation notice

Central Obligation

Infrastructure Act 2015

Regulatory Powers

Facilitation

Licensing regime Strategies and

delivery programmes

MER UK plans

Regulatory powers

Non-binding dispute resolution

Information and samples

Meetings Licence

model clauses Third party

access

MER UK Strategy: ‘to take the steps necessary to secure that the

maximum value of economically recoverable petroleum is recovered’

Exploration Regional development Asset stewardship Technology Decommissioning

Collaboration

Cost reduction

Sanctions

Principal Objective The principal objective is that of ‘maximising the economic recovery of UK petroleum’

Energy Acts 2011 and 2016 Petroleum Act 1998

MER UK Strategy

Commitments mean commitments

10. …..exploration activities [must be]…:

a. optimal for maximising the value of economically

recoverable petroleum …; and

b. [be consistent with OGA Plans]…outside the

licence area….

Exploration Supporting Obligations

11. The licensee … must not relinquish the licence

without first having completed the work programme…

12. [However, if a licence is relinquished because

activity will not make a ROI] the licensee must

• carry out a work programme of the same or a

similar nature to the one set out in the licence or

• such other work programme as the licensee may

agree with the OGA enables the Central Obligation

to be met.

Exploration Strategy

Actions defined in Exploration Delivery Programme

Licence Stewardship

Licensing Activity

Optimise Acreage Use

Monitor Work Programme Delivery

Regional Exploration

Play Based Exploration

Data and Knowledge Sharing

Global Promotion

Technical Assurance

Portfolio Management

Improve Technical Standards

Remove Barriers to Activity

Licensing Activity (Regulate)

The OGA is being flexible with existing and future licenses

New Flexible ‘Innovate’ Licences 30th Round will offer significant acreage in

producing basins

21st Century Roadmap Project

2015 & 2016 Geophysical Programmes

2016 seismic data acquisition complete, reprocessing underway for release

2Q/3Q 2017

£40m UK Government funding to incentivise frontier exploration

Incentivising Exploration (Promote)

2015 Acquisition (23,000kms) 2015 Reprocessing (15,500kms)

2016 Acquisition (16,800kms) 2016 Reprocessing (23,500kms)

• Steered by an industry technical committee

• Well Look-Back Study issued 2015, Palaeozoic study issued in 2Q 2016 to

over 60 participants

• Petroleum systems analyses being kicked off

• East Shetland Platform

• South West Britain

• Mature area studies being planned

• Focused petroleum systems, play, biostratigraphy, geochemistry and

other studies

• Industry funding, data and participation required and expected 2D line locations are subject to data availability and quality.

The final datasets may vary from this illustration 30th Licensing Round areas are proposed and subject to further

consultation and approvals.

40,000 km new/reprocessed legacy data available under Open Government

Licence

Stimulating near-term activities

(Influence)

The OGA is working hard to support exploration and appraisal activity

* 2017 and 2018 Well Forecast from Operator Engagement

• High well costs

• JV misalignment

• Global lack of funding

Barriers to activity

• Government funding and fiscal measures

• OGA is promoting UKCS exploration and

investment

• OGA working with operators to ensure

inventory is drilled

• Industry must reduce finding costs and

share information

Measures to support

Asset Stewardship Expectations

Expectations are not intended to add unnecessary burden on Industry

• Submit to the OGA annually (on request) during the initial/second licence term:

(1) An evaluation of resources on each licence, and

(2) An associated E&A work programme

• Engage fully with the OGA in pre- and post-well evaluations, and well operations.

2. Exploration and Appraisal Subsurface Work Programme

• Annually, through the E&P lifecycle, the JV should consider all relevant available subsurface

datasets and their ability to cost effectively reduce uncertainty or increase recovery

• Drive business decisions throughout the E&P lifecycle that are data supported and robust

3. Optimum use of Subsurface Data

• Joint Ventures should have a signed JOA by the end of the first six months of the initial licence term

• Notify the OGA at least one month prior to an investment decision to drill or drop

• Notify the OGA prior to commencing any farm out/divestment activity

4. Licence Activity, Decision Points and Milestones

Optimum use of seismic data

Application of modern seismic data has the potential to unlock value

2013 3D seismic Legacy 1990s 3D

| Beryl Area | Seismic driving Apache’s success Greatly improved imaging has helped to identify and de-risk a large portfolio of exploration and development prospects

http://files.shareholder.com/downloads/APA/0x0x862096/2411AA80-245F-42B5-8273-C580FC7F932A/North_Sea_Region_November_17.pdf

E&P operators’ views

Followed by question & answer session

Why explore on the UKCS?

Jenny Morris Head of Exploration UK

Mike Davies Senior Manager

Basin Margin, Europe

Where do we need to improve?

Nick Terrell Managing Director

What are the challenges?

Why explore on the UKCS?

© Statoil ASA

Diverse, varied &

complex subsurface

Missed opportunities

Under-explored

areas

World class

source rock

Stratigraphic

prospect

potential

Commercially

attractive Infrastructure

in place

What are the challenges ?

DIMINISHING MATERIAL

PROSPECTS

GLOBAL COMPETITION

FOR DRILL WORTHY INTEGRATING BIG DATA

BASIN KNOWLEDGE

SHARING AND

RETENTION

Promote ourselves - get the message out!

What do we need to do differently?

What do we need to improve?

Data access

Standardisation

Data quality

Collaboration

Transparency

Innovative commercial models

Infrastructure access & longevity

Commercial complexity Efficient capital deployment

Costs

Better regional understanding

Deployment of innovative technologies

Technology access

Knowledge Sharing

Discussion