On 11 February the Oil and Gas Authority (OGA) announced that the “Revised OGA Strategy” had come into force. The Strategy reaffirms the Central Obligation that all ‘relevant persons’ in the exercise of their ‘relevant activities’ must take the steps necessary to secure that the maximum value of economically recoverable petroleum is recovered from the strata beneath the relevant UK waters. Now added to this is the further obligation that all relevant persons take, inter alia, appropriate steps to assist the Secretary of State in supporting carbon capture and storage projects.
Understandably there is strong focus on the necessity for holders of petroleum licences (“petroleum licensees”) to collaborate with those parties undertaking carbon capture and storage (“CCS licensees”), but this does not appear to be a two-way street. If the OGA Strategy is meant to be more overarching, taking in both production from, and carbon capture and storage on, the UK Continental Shelf (UKCS), then arguably it is not treating petroleum licensees and CCS licensees evenly. Whereas petroleum licensees are obliged to collaborate with CCS licensees (para 21 of the OGA Strategy), no such obligation is placed upon CCS licensees when they are considering storage projects.
While CCS licences are awarded over areas where there is no E&P activity, collaboration isn’t an issue. Moreover, it is unlikely to be a critical issue where CCS licences are awarded in areas in which hydrocarbon fields are already in production. Field owners and CCS licensees will be mutually incentivised to collaborate if it means that the cost of decommissioning can be postponed and shared through re-purposing of production facilities for future CCS projects. However, this is not the case where CCS licensees and petroleum licensees are eyeing up the same ‘not fully depleted’ reservoirs – the petroleum licensee from the perspective that there are more commercial reserves to be recovered, and the CCS licensee from the perspective that there is sufficient capacity available that makes it commercially viable as a carbon store. It is potentially an issue in the UK Southern North Sea where an application for a CCS licence is currently with the OGA, and in time possibly also for the Central North Sea and Northern North Sea.
Although the OGA has statutory powers under Chapter 2 of Part 2 of the Energy Act 2016 to resolve disputes between competing petroleum licensees, this power would appear not to extend to resolving disputes between petroleum licensees and CCS licensees, or between CCS licensees. If it does, then it needs to be more clearly spelt out.
The challenge for the OGA lies in developing guidance about how competing storage and production projects will be handled, creating certainty, and thereby avoiding not only future disputes but also wasted investment. Expanding paragraph 21 of the OGA Strategy so that CCS licensees are under an equal duty would at least be a step in the right direction.
Broadening OGA Strategy
Perhaps for the long term, a more logical development – and certainly one that is more visionary – would be to broaden the OGA Strategy itself so that universal principles of collaboration are applied among all hydrocarbon producers and transporters, parties involved in carbon capture and storage, and in wind and other forms of alternative power that use the UKCS as their sphere of operation. By creating a regime of universal collaboration that applies to and is enforceable against all stakeholders will avoid friction and in so doing assist the Secretary of State in meeting the UK’s net zero target. Surely the common aim for all.
If you have any questions on the issues raised in this article, please contact Stuart Carter.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.