OGA overview and update 5 May 2015

UKCS Challenges Economic challenges intensified since the Wood Review Exploration & production decline Increasing costs Sharp decline in oil price Brent $/barrel Jan 2011 March 2015 An all-time low for exploration and appraisal activity in 2014 Lowest production revenue for nearly 2 decades Significant falls in investment predicted over the next three years Economic challenges intensified since the Wood Review

Prize of additional 3-4 billion boe 375,000 industry jobs to protect 2014 Wood Review Key recommendations Sector strategies Urgent need for enhanced stewardship New Maximising Economic Recovery strategy New independent regulator with additional powers and resources Commitment from industry to collaborate Stronger tripartite relationship between industry, government and regulator Prize of additional 3-4 billion boe 375,000 industry jobs to protect

OGA focusing on priorities A behavioural and cultural shift is necessary to tackle the challenges ahead OGA will implement the key recommendations and actions identified in the Wood Review The Government has recognised the need for ongoing fiscal reform with trusted advice from OGA Industry must urgently take action to create a more competitive cost base New independent regulator for the UK oil and gas sector Maximising economic recovery of UK oil and gas resources New regulatory powers, better resourced and funded Catalyst for change and facilitator of action and collaboration The OGA has a key role to play in driving action

OGA up and running and forming the team Building the OGA 1 April Q3 ‘15 Q3 ‘16 Feb Commission Response Executive Agency Leadership complete Critical mass to deliver Government Company DECC DECC DECC OGA Executive Agency (Civil Service) OGA Government Company EDU LED Historically From 1 April From Summer 2016 OGA up and running and forming the team

Establishing the early priorities for the OGA Call to Action Secretary of State Commission to address impact of oil price decline Strong engagement from industry and government Identified key risks facing the industry and immediate priorities Integrated plan to create focus and accountability Outlined clear actions for the OGA and industry Establishing the early priorities for the OGA

Driving investment Future fiscal priorities Petroleum revenue tax reduced from 50% to 35% Future fiscal priorities OGA, HMT and Industry continue working in close collaboration per Driving Investment Plan overall tax burden fall wider benefits considered global competitiveness Further work on options to incentivise exploration Infrastructure, decommissioning and PRT Decommissioning costs Confirmation of new basin-wide investment allowance £20m for new geophysical surveys Supplementary corporation tax reduced from 30% to 20% Industry, the OGA and the Treasury working well together

Leaders creating the new culture Culture and behaviour A catalyst for change Cultural transformation Strong relationships A trusted advisor Cost-conscious approach Leaders creating the new culture

Good progress so far but lots to do Looking ahead Confirm and announce leadership team – May Confirm and announce first NED appointment – July Begin next wave of recruitment activity – July Prepare draft bill for first session of Parliament following election – July Publish Call to Action progress update – September Complete consultation on MER UK strategy – September Introduce levy – October Move into new Aberdeen HQ – October Good progress so far but lots to do