Tara Buchan: Wide-ranging powers of the oil regulator

Signifying a period of important change in the North Sea oil and gas industry, the Energy Bill introduces the Oil & Gas Authority (OGA) as the new independent regulator for the industry, cementing the government’s commitment to implement the proposals set forth in the Wood Review by continuing to support development of North Sea oil and gas.

The Energy Bill is set to hand the OGA more powers over the North Sea oil and gas industry

Established on 1 April, the OGA has already taken over the secretary of state’s existing regulatory powers in relation to oil and gas. In addition, new powers are proposed in the Energy Bill, such as the authority to attend company meetings, request information and data as required and impose sanctions where appropriate.

One of the powers transferred from the secretary of state to the OGA is the right to revoke a licence where it considers there has been a failure to comply with various obligations. Previously, this was an absolute power without any right of appeal but under the Bill, licence holders will now be able to appeal against a revocation notice. However, the appeal tribunal would remit a successful appeal decision back to the OGA for review, with proposed recommendations.

It is clear that the OGA will play a much more “present” role in the day-to-day operations in the North Sea than we have previously seen from the secretary of state. This is evident in the power of the OGA to get involved in the dispute resolution process for any matters relating to operations in the UK continental shelf (UKCS).

Crucially, the OGA will be able to consider disputes “on its own initiative”, meaning that parties may find themselves answerable to the OGA without having asked for assistance. The idea behind this power is to enable the principal objective of maximising the economic recovery of UK petroleum to be achieved by encouraging parties to work amicably and efficiently to resolve issues.

Little guidance has been given as to how the OGA will enforce this power and how much (or how little) involvement they will have whilst in attendance at meetings. The Wood Review proposed that OGA involvement in disputes would be non-binding on the parties involved and this has been reflected in the Bill, however the process by which the OGA deals with disputes and imposes sanctions will be binding on parties. As the Bill progresses through parliament, it will be interesting to see if any further amendments are made.

It is clear that the additional powers created for the OGA highlight the government’s commitment to ensure that companies operating in the North Sea work collaboratively, with the overriding aim of achieving the maximisation of economic recovery of hydrocarbons from the UKCS.

Tara Buchan is a solicitor in the oil and gas team at law firm Brodies