Time to Simplify the Landscape?

27 October 2016

By Alison Baker & Craig Stevens

When we wrote “A Sea Change – the Future of North Sea Oil & Gas” back in June, our discussions with key industry protagonists led us to consider several different methodologies which might encourage collaboration and closer working relationships in the UKCS and beyond.  One of those was the Super JV.

It’s interesting that at the recent Oil & Gas Authority MER UK conference in Aberdeen several of the themes we mentioned in Sea Change were touched on and throughout the notion of the Super JV was alluded to.

In summing up the day, Andy Samuel, Chief Executive of the OGA, mentioned the importance of “getting the right assets in the right hands to accelerate decision making”, that “consolidation may be necessary” and why it could be vital to “simplify the landscape” – all key tenets of the Super JV approach.  And, whilst we recognise that the Super JV may be one option for improving execution and cost outcomes, rather than necessarily the answer, it’s certainly worth exploring in a bit more detail.

It’s not necessarily about taking assets away from companies, rather it allows companies to concentrate on their core strengths and value streams whilst ensuring that non-core activity is maximised, potentially by another operator or JV.

It’s fairly obvious that there are many potential road blocks along the way to achieving a Super JV set up but it is also hugely encouraging that the industry, and moreover the industry regulator, is striving for solutions to maximise the economic recovery from the UKCS.  And that solution set should consider all such structures which strive for common processes across the operator group and improve efficiency and execution.

Today we publish a new document in the Sea Change series – “the Super JV” sets out some of the benefits of such a structure, some of the building blocks for success and where the potential pitfalls are that need collaboration among all the stakeholders to resolve.  It’s not designed to be a solutioning document, rather our aim is to encourage further debate and discussion around all such potential structures. You can download the paper below. 

The benefits range from the obvious cost synergies, extension of asset life and recovery through to maintenance programme optimisation and data consistency and transparency.  All value enhancing to the participants.

And those building blocks which lead the way to the perceived benefits are broadly aligned to the following groups:

  • The Asset Group
  • The Participants
  • Structure & Governance
  • Operator
  • Funding
  • Valuations
  • Collaboration v Collusion

Each of these elements is vital in the formation of a Super JV and each will bring its own benefits and issues, but collaboration also brings difficulty and the need to ensure that that collaboration doesn’t flout competition law is probably the most important hurdle to overcome. Collaboration may be the new “c-word”, but it’s at the core of the OGA’s modus operandi and is vital to the future of the basin.

So, what are the next steps? 

We’ve outlined a concept, talked about some of the potential benefits and highlighted some of the hurdles to overcome.  What is needed now is a concerted, collaborative effort from industry, the regulator and professional service providers to consider this, and similar, concepts in much more detail and convert the best ideas into reality. 

And if this works, there are other future elaborations to further enhance the idea, such as consortium financing for the Super JV, based on the risk of the JV itself rather than the weakest link in the chain.  Who knows?

It may be something completely different or off the wall, but, what is clear is that, for the sake of the UKCS, it’s definitely time to simplify the landscape.

Download A Sea Change - the Super Joint Venture

 

Alison Baker | UK Head of Oil & Gas
Email | +44 (0)20 780 43314

View Alison Baker'sprofile

 

Craig Stevens | Senior Manager
Email | +44(0)131 260 4661

 

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Comments

nice information.

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