Aberdeen: U.K. Director Discusses Licensing Policies and Practices

Simon Toole, Director of Licensing, Exploration, and Development with the Dept. of Trade and Industry (DTI), kicked off a recent Emerging Leaders Program event with an introduction to DTI—why it is there and what it does. DTI is a government body responsible for regulating the U.K.’s oil and gas licensing regime. It has been around for 60 years and originally was concerned with onshore licensing until the 1970s, when most developments moved offshore.

The objective of DTI in the earlier days was to attract companies to the basin; oil and gas reserves were unknown, and the environment was challenging. A licensing regime was developed that was cheap and, once initial obligations were complete, required little maintenance for the operator. Although acreage was bought, in many blocks operators were not investing enough in fields and too little development work was being carried out, which led to fallow fields, Toole said.

Five years ago, the government decided to put pressure on operators to “invest or divest” and become more active in the area. It believed that there were three aspects to generating wealth—land, labor, and capital. In the U.K. Continental Shelf, the land was tied up, the pool of operators was not sufficiently diverse to match the opportunities, and there was too little interest for funding.

The government determined that of the 1,000 license blocks, there had been no drilling activity for 4 years in half of them, Toole said. DTI could either change the law to take them back or adapt the system, with the support of the industry. The system was adapted so that operators whose blocks had no activity for 4 years had 1 year to put in place a plan for activity (drilling or seismic studies) or give the field back.

DTI recognized that to maximize recovery from the Continental Shelf, new fields would need to be discovered, existing discoveries would need to be developed, and the last drop would have to be squeezed from producing fields. The government was concerned that all reserves would not be recovered from producing fields—it was estimated that 2–4 billion bbl was in danger. The agreed way ahead was the new “stewardship” process, in which the focus would be placed on those fields where there were concerns that investment was below that deserved by the field.

Toole also discussed the role of DTI in infrastructure access and environmental assessments for challenging areas. He closed the event by discussing the new entrants’ role in the U.K. Continental Shelf. He said that the area is currently thriving and should continue to do so for several years.

 

Exploring the Continental Shelf's potential.