UK oil and gas industry moves to formalise cooperation on 'economic recovery'

The initiative has been set up by Oil and Gas UK in addition to changes already taking place at individual company level to improve efficiency and drive down costs, and the industry body will provide "dedicated resource" to support its work. The ETF's work will focus on three areas in which improvements could be made: cultural and behavioural changes, standardisation and day to day business processes.

Oil and Gas UK co-chair John Pearson, who is also the group president for Northern Europe at AMEC Foster Wheeler, will lead the ETF. He said that the initiative would "[help] the UK to compete globally" by encouraging cooperation and focussing on "initiatives that add real value for our sector".

"Tackling efficiency has been at the forefront of industry minds for some time – but has become more acute and urgent as the value of our end product has more than halved in the last year," he said. "We now need to step up, increase the effort and resource we're putting in, and get the job done as a united industry."

"We've put a lot of thought into where we can have most impact – and will be working with the industry to see these projects through. Only if industry works together can we achieve the major transformation in efficiency we need to see," he said.

Oil and gas currently accounts for 70% of the UK's primary energy needs; a figure which the UK government's Department of Energy and Climate Change (DECC) expects will remain unchanged until at least 2030. In 2014, industry expert Sir Ian Wood set out how much of this demand could be met from reserves remaining on the UKCS, by adopting a strategy of maximising economic recovery (MER UK) led by a new regulator, the Oil and Gas Authority (OGA). The OGA was established on 1 April 2015 and given oversight of MER UK, which will be implemented in conjunction with government and industry.

According to the latest estimates, the equivalent of around 20 billion barrels of oil and gas could still be found on the UKCS. However, operating costs per unit recovered are now about 60% higher than they were as recently as 2011, according to Oil and Gas UK's latest 'state of the industry' report. A combination of increased operating costs and falling oil prices, from over $100 per barrel in September last year to close to $50 today, could make much of these remaining reserves uneconomical to exploit.

Described by Oil and Gas UK as "the vehicle we need to enact change", the EFT will drive sector-wide improvements in efficiency and competitiveness alongside structural changes currently being implemented by individual companies. Its aims include delivering the behavioural changes major oil and gas firms need to compete in a lower oil price world, driving simplicity and standardisation and improving day to day operating efficiency.

Among its early priorities, the ETF intends to establish an 'Efficiency Charter', supported by industry events, before the end of the year. It will seek to improve standardisation in areas such as well plugging and abandonment, in order to deliver "significant" potential savings identified by early analysis. It will also review the day to day operations of the offshore oil and gas industry, exploring how companies can work together to share resources and good practice. As part of this, it is working to help companies rationalise their inventories and developing a central dataset of available stock.

Oil and Gas UK's business development director, Stephen Marcos Jones, said that the industry body did not intend to impose new requirements on operators. However, it had been "listening to our members and believe it's increasingly vital we have in place an effective means of sharing - expertise, resources and ideas - throughout the supply chain", he said.

"As the ETF, we will hold a mirror up to the industry with the aim of transforming our sector from within – planning together and allowing individual companies to act in a way which best suits the challenge they face," he said.

Oil and Gas UK is due to publish its annual 'economic report' on the state of the industry next week.