Supply chain action plans mandated for new UKCS oil & gas projects

New guidance from the Aberdeen based Oil & Gas Authority (OGA) which entered into force this month will oblige oil and gas companies operating in the United Kingdom Continental Shelf (UKCS) to develop Supply Chain Action Plans (SCAPs) to help firms reduce cost and time overruns in the supply chain and increase value.

A recent OGA report “Lessons Learned from UKCS Oil and Gas Projects 2011-2016 highlighted that a significant number of recent projects carried out in the UKCS were either delivered late and/or were significantly over-budget.

As a result, there was a loss of value both for companies and HM Treasury through reduced revenue. The report identified a number of contributory factors and made recommendations for future improvement, including early engagement with the supply chain.

Indeed, a recent case studies from the Oil & Gas UK Efficiency Task Force (below) demonstrated that such early engagement with supply chains could remove up to 25% of project cost through process efficiencies, reduced administration requirements and the use of alternative methods and technologies.

Screenshot 2018-01-09 at 20.15.01

Source: Oil & Gas UK Efficiency Task Force, May 2016.

SCAPs will need to demonstrate that an operator has developed a comprehensive contracting strategy, and will be evaluated by OGA based on how the plan addresses the issues of supplier engagement, trust, innovation and quality throughout the life of a project.

As of this month, the OGA will accept any SCAP submissions, and submissions will become mandatory for all new field development plans (FDPs) and decommissioning programmes (DPs) from 1 April 2018.

Bill Cattanach, head of supply chain at the OGA, said: “[SCAPs] provide a golden opportunity to drive behavioural change and promote a culture of active engagement between operators and the service sector.”

He added it was widely accepted that many of the solutions to the government’s strategy to maximise economic recovery from the UK continental shelf – dubbed MER UK – lie within the supply chain.

In addition, the SCAP will enable the operator to highlight how it intends to contribute towards Total Value Add through fair and open engagement with its chosen supply chains evidence of robust invitation to tender (ITT) assessment process and presented on a standardised evaluation matrix.

The OGA has published guidance on creating SCAPs and will be running workshops early this year to help firms understand what it expects from these plans.