UK Upstream Praying for Smooth Brexit
Upstream lobby group Oil & Gas UK has been briefing the government on the implications of Brexit for oil and gas producers once the UK has left what is now the EU-28. That is due to happen in March 2019 on terms that have yet to be decided.
Spokesman Gareth Wynn said it had taken a deliberately apolitical, pragmatic approach to the question: "We are not interested in how we reach a deal," he told NGW in an interview, adding: "‘We are more interested in the outcomes for industry."
OGUK has explained to government the risks of leaving with no deal, and described areas that the deal must include if it is to be beneficial for the upstream. Disruption would undo the good work done to keep costs down since the 2014 oil price shock and the resultant chill in investment.
The encouraging news is that OGUK’s representations have had a “pretty good hearing” from the government's Department for Business, Energy and Industrial Strategy (Beis), the Department for Exiting the EU (Dexeu), and the finance ministry, he said.
There are some major 'known unknowns' that threaten the continued smooth operations upstream after Brexit: these include the impact of the Union Customs Code, which is expected by April 2019; what kind of access to labour, goods and markets the UK will have; and aviation regulations. Excluding the UK from these could mean goods stuck in customs sheds; key specialists unable to work on platforms; and higher costs as UK operators have to keep more spare parts and train more staff to ensure continued operations.
OGUK is working to ensure that the UK’s voice is heard in Brussels, particularly as the UK is the biggest producer in the EU, and protecting the licence to operate is key, in an EU dominated by nuclear and renewable energy production. There are about a dozen pieces of regulation, Wynn says, that could make it more expensive to operate oil and gas fields offshore, including the Environmental Liability Directive, the Offshore Safety Directive and the Marine Strategy Framework Directive. “Without a voice at the table the risks are potentially significant,” he said: “Other countries have less at stake than we do.”
“For any deal to be good, it must reflect these concerns to the largest degree possible. Anything that unwinds the hardwon gains in efficiency will be very unwelcome,” Wynn added.
However there is some help from OGUK’s sister organisations in Europe, including the International Association of Oil & Gas Producers (IOGP).
OGUK is still waiting to hear from minister Dominic Raab’s Dexeu about contingency plans for a no-deal Brexit in relation to the upstream, which is expected this month. Wynn said that OGUK would respond in one go to that, and to the Chequers exit plan (agreed by the UK cabinet on August 7). However the EU's chief negotiator Michel Barnier has been quoted saying that the Chequers plan is not workable.