United Kingdom Onshore Oil and Gas launches Shale Community Engagement Charter
27 June 2013
United Kingdom Onshore Oil and Gas (UKOOG), the representative body for UK onshore oil and gas companies, is today publishing for the first time a binding industry charter for UKOOG members covering the minimum standards of engagement required with local communities alongside a community benefits scheme designed for the next phase of shale oil and gas exploration and production.
The UK Onshore Oil and Gas industry has been in existence for over a hundred and fifty years and has drilled over 2,000 wells, currently producing over 20,000 barrels of oil equivalent per day at 120 sites. The Community Engagement Charter builds on this history by continuing to set the highest standards of openness and transparency and will frame our relationship with the communities where we operate. The Charter sets out the minimum standards that communities should expect from operators in shale reservoirs that display the UKOOG logo.
The Charter covers how operators will communicate and engage and also makes commitments with respect to local logistics, adherence to health and safety, compliance with environmental regulation and local needs and jobs.
Based on production and gas in place scenarios produced by the Institute of Directors (IoD) in its May 2013 Shale Gas report, community benefits under the new scheme could be worth in excess of £1.1 billion across the UK over a 25 year production timescale, with much of this benefit coming in the first 10 years. Exact numbers will depend on local geology and flow rates.
The IoD report in its mid case scenario estimated a total of 100 production sites, equating to a potential community benefit per site in the region of £5m-£10m.
The benefits mechanism is based on a 1% share of revenue, i.e. before all costs of production are taken into account and is based on producing wells.
Ken Cronin, Chief Executive, UKOOG commented: “Today’s announcement underlines our commitment to the local communities we work within. The economic benefits of our industry will be experienced nationally as our products provide energy security, economic growth and revenue to the Exchequer.
“We still have more to ascertain about the geology, cost and flow rates of wells before we enter a production phase. However it is clear that increasing UK gas supply will exert downward pressure on UK gas prices. Our footprint on the ground will be small in comparison to the economic and energy contribution made to Britain; however we must recognise that our social licence to operate is linked to ensuring that the way we work is open and transparent and some of those benefits are shared with the communities that host our operations on behalf of others across the country.”
It is UKOOG’s intention to come forward with further detail on fund allocation later in the year but at present the industry envisages that community funding will be targeted at both the very local level with a local community fund entirely administered by local people for local needs with an appropriate cap for very small communities and a “regional” package of funding at a County level. We will be working with interested parties and councils over the course of the next few months to finalise our plans.
While communities may use the funds to pay for community-wide measures, at each stage the industry will work with the local community funds to calculate the level of benefits at a household equivalent basis allowing residents to understand what their equivalent share of the benefits would be.
Uses of the community fund will be agreed in conjunction with the local community and could include (but not be restricted to) community based projects to stimulate economic growth, to improve welfare in the surrounding area, to promote energy projects or to provide the basis of collective bargaining with energy supply companies.
In addition the industry has committed to provide benefits to local communities at the exploration/appraisal stage of £100,000 per well site where hydraulic fracturing takes place. Exploration wells are typically single well sites used for the purpose of gaining geological, cost and gas flow data.
Contributions at the exploration/appraisal stages will be made on a site by site basis and will be payable upon successfully obtaining all planning and other regulatory consents and subsequently drilling, and hydraulically fracturing and flow testing the well.