Recovery of UK petroleum
240.On 10 June 2013 the Secretary of State of Energy and Climate Change announced a review of UK offshore oil and gas recovery and its regulation, led by Sir Ian Wood. The final report of Sir Ian’s UK Continental Shelf Maximising Recovery Review was published on 24 February 2014.
241.The report identified a number of key issues including the following:
The need for operators to focus on maximising economic recovery for the UK as well as pursuing their individual commercial objectives.
The need for a greater resourced and more proactive regulator.
The need for significantly improved asset stewardship.
The need for far greater constructive collaboration between operators.
The need for better implementation of industry strategies.
242.To address these issues, Sir Ian made a number of principal recommendations, including that a maximising economic recovery of UK petroleum strategy be developed with the regulator exercising its functions with a view to maximising the economic recovery of petroleum from UK waters.
243.The Government has accepted the findings of the report and published its response on 16 July 2014
Section 41: Maximising economic recovery of UK petroleum
244.Section 41 implements the first recommendation, covering maximising the economic recovery of UK offshore petroleum and the strategy. It does this by inserting a number of new sections into the Petroleum Act 1998.
245.New section 9A provides for a principal objective of maximising the economic recovery of UK offshore petroleum. The section requires the Secretary of State to produce a strategy which is the means for enabling the principal objective to be met. The strategy will set out what is meant by maximising the economic recovery of UK petroleum. This will provide the flexibility to take account of how the principle should apply in different circumstances along with the changing needs of the UK Continental Shelf.
246.New section 9B places a duty on the Secretary of State to carry out relevant functions in accordance with the strategy.
247.New section 9C places duties on licence holders, operators appointed under those licences and owners of upstream petroleum infrastructure to carry out certain identified activities in accordance with the strategy. Subsection (4) places a duty on a person planning and carrying out the commissioning of upstream petroleum infrastructure. This is necessary because that person may not be the owner of such infrastructure and would not fall within subsection (3).
248.New section 9D places a duty on the Secretary of State to lay before Parliament a report at the end of each reporting period on the extent to which relevant persons have acted in accordance with the strategy. This is the sanction for breach of the obligations in the new provision of the Petroleum Act 1998 inserted by this section.
249.New section 9F makes provision in respect of the production and revision of the strategy by the Secretary of State. In particular, the first strategy must be produced within one year of this provision coming into force. New section 9G sets out the procedure that must be followed by the Secretary of State in producing and revising the strategy.
Section 42: Levy on holders of certain energy industry licences and Schedule 7: The Licensing Levy
250.Section 42 provides the Secretary of State with a power to raise a levy from the holders of certain energy industry licences.
251.Subsection (1) provides for the Secretary of State to impose a levy on persons holding licences for the exploitation of petroleum, the unloading and storing of gas and the storage of carbon dioxide.
252.Subsection (3) provides that the amount of levy must not exceed the costs incurred by the Secretary of State in carrying out relevant functions (these are set out in subsection (5)). The levy cannot be used to recover costs in respect of areas in which a charge is payable under the Gas and Petroleum (Consents) Charges Regulations 2013 as those provisions stand when this provision comes into force.
253.Schedule 7 contains illustrations of the way in which the levy power can be used.
