Oil and Gas Division Update, March 2016

Energy Transition Group
18 Mar 2016

Through the start of 2016 oil and gas prices have remained depressed with the knock on impacts being felt across the Energy sector and the wider economy. The general Industry consensus is that prices will remain depressed in the short term.

Costs in the North Sea have risen substantially over recent years while production is well below the peak. Oil and Gas UK are coordinating a task force to sustainably reduce the cost of a central North Sea well by 50% without compromising safety – work that aligns with the founding objectives of the Mining Institutes to “improve productivity and safety”. The new Oil and Gas Authority, established by the UK Government to support the objective of maximising economic recovery of UK oil and gas resources, has been fully engaged this work and is very supportive.

Job losses in the UK oil and gas industry have been significant and are continuing, with the major impact being seen in the North east of Scotland. As current projects come to an end there are few, if any, new projects and further job losses can be anticipated.

The UK has extensive shale gas and oil resources. Development of these resources could provide substantial benefits, including: reducing dependence on increasing foreign imports, increased security of supply, economic benefit and Industrial activity in some of the most deprived areas of the UK.

Environmental groups and the media have widely publicised issues from the US leading to a perception and concern that the development of onshore UK shale resources would be unsafe. Attention in 2015 focused on well integrity.

The Institute of Mechanical Engineers (IMechE) and the IOM3 agreed to set up a joint working group to provide the public with an informed view on the integrity of UK onshore wells.

The Institutes engaged representatives from academia, industry and the UK Regulators. Available reports, UK Regulations, Industry Standards and Guidelines were reviewed. The reports included an analysis of the integrity of 2,152 onshore oil and gas wells drilled in the UK from 1902 to 2013. The workgroup surveyed UK onshore operators, consulted widely and held a workshop.

The review confirmed the findings from pervious Royal Society and House of Commons led reviews that had concluded that the UK has the most robust Regulatory regime available backed up by the most comprehensive Industry Guidelines for onshore well integrity.

The workgroup concluded that there was no justification to preclude shale development on the basis of concerns over well integrity.

The workgroup documented their work in a paper that was presented at a one day summit hosted by the IMechE in London on the 23rd February with a follow up briefing to members of the House of Commons and the House of Lords.

A big thank you to everyone who responded to the electronic survey on potential events for the new Institute office. The feedback was extremely useful and is being used to format an event.


Steve Bedford

Oil and Gas Division Chairman

17th March 2016