How existing supply chain SMEs can help 14th round licensees
It is widely expected that an announcement will be made in the next few months concerning the award of petroleum exploration and development licences in the 14th Landward Licensing Round – and SMEs are ready to help boost the prospects of successful applicants
The 14th round is the first such award in 6 years, and was launched by the Energy Minister in July 2014. It is understood that demand for new licences has been very strong.
The Government is assessing licence applications on:
(i) the financial viability of the applicant
(ii) the technical capability of the applicant
(iii) the quality of the work programme
(iv) the proven track record of the applicant
New ‘Model Clauses’ for petroleum exploration and development licences were also brought into effect in July 2014.
Amongst other changes, the Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014 introduce a new “drill-or-drop” obligation borrowed from recent seaward licences. This obligation provides for early termination of the licence if the licensee hasn’t completed the drill-or-drop element of its work programme by the end of the drill-or-drop period and has not undertaken to complete the remainder of the work within the initial term.
In a nutshell, these changes and the way applications are being assessed mean that successful licensees will be expected to rapidly accelerate the process of exploration.
How existing British supply chain SMEs can help 14th round applicants
New licensees and operators, particularly those with no previous exposure to UK onshore oil and gas, will be much better able to satisfy the new license obligations by tapping into the existing wealth of knowledge that exists within the SME supply chain community.
Partnering with existing supply chain SMEs – that are already responsible for much of the work when it comes to acquiring land, applying for planning permission and environmental permits, designing and constructing wells, undertaking baseline and operational environmental monitoring, supplying drilling fluids and managing extractive wastes – will help new licensees acquire the technical capabilities needed whilst also enabling them to implement their work programmes much more speedily.
The OESG is eager to facilitate introductions between supply chain SMEs and new licensees and operators, and believes that smaller companies, that are more trusted by the public, also have a role to play in building social acceptance of onshore oil and gas.
Companies that have applied for licenses in the 14th round, and that would like to find out more about how Britain’s existing supply chain SMEs can help them accelerate their plans, are invited to contact the OESG in the first instance.