Field development plans

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How can governments use the FDP review process to maximise benefits to their countries?

This resource page draws from our training on the topic and the associated handbook.

Audio overview

(The audio overview and discussion is generated by Notebook LM)

Key points

Petroleum agreements commonly receive a great deal of attention and scrutiny, with stakeholders asking whether the country ‘got a good deal’? But decisions made in the Field Development Plans (FDPs) can create a higher magnitude of value for the country. Governments can maximise benefits by taking a proactive and strategic approach throughout the entire project lifecycle, from discovery to decommissioning. This involves establishing a robust regulatory framework, actively engaging with operators, building capacity, and focusing on optimising value for the country.

Here’s a breakdown of key actions:

Early and Ongoing Engagement: Once the Field Development Plan is submitted governments only have 1-3 months to review the massive submission. Governments should treat the FDP as an ongoing process that begins at the point of discovery, rather than waiting for the formal submission.

    • This involves active planning from the early stages, such as the appraisal phase, and attending license meetings with the operator.
    • The government should establish a schedule of reviews starting in the appraisal phase.
    • Early engagement allows the government to influence project design and value, ensuring alignment with national objectives.
    • Concept selection is a critical point in the process where governments can have significant influence on the project design. At that stage companies have not yet invested large amounts into the project, in contrast to the FDP submission stage, when larger sums have been committed and the government’s influence declines.

Collaborative Approach: Governments should promote a collaborative environment with the operator, based on a shared understanding of project risks and opportunities.

    • This includes open communication and information sharing, which is crucial for building a productive relationship and resolving issues quickly.
    • Collaboration with minority joint venture partners (including the national oil company) and between them can also yield benefits by re-orienting efforts towards value creation.

Robust Regulatory Framework: A clear regulatory framework, encompassing policies, laws, and regulations, is essential to guide the development of the FDP and align it with government objectives.

    • This framework should provide clear guidelines to operators on the content and form of the FDP submission.
    • It also allows for a non-discriminatory approach towards investors, and avoid using the petroleum agreement as the primary legal instrument.

Focus on Optimising Value: Governments must focus on optimising value for the country, which goes beyond just production and revenue, also including social and environmental considerations.

    • This involves understanding the operator’s drivers, which may differ from the government’s. Governments should identify areas of potential misalignment with companies and focus their efforts and scrutiny on those.
    • Economic analysis is a key tool for governments to understand how a project will benefit the country, particularly government revenue streams.
    • Governments should ensure they have the expertise and tools to conduct this analysis, using their own models to evaluate the feasibility of a project and returns for the country.

Capacity Building: New producer countries often face an asymmetry of expertise with operators. Therefore, governments should strategically invest in capacity building to ensure they can effectively review and oversee FDPs.

    • A skills-gap analysis is crucial to identify areas where expertise is needed.
    • Governments can also leverage seasoned professionals as consultants to support their review of the FDP and to provide targeted training.
    • Operators can be required to provide training budgets to assist in developing capacity in critical areas.

Internal Government Coordination: Effective coordination among government agencies is vital to avoid conflicting objectives and ensure a unified approach.

    • An integrated, multi-disciplinary team should be established to ensure all aspects of the project (strategic, technical, economic, social, and environmental) are covered. The environmental and finance agencies should be involved early in the process.
    • A clear process for resolving misalignments between government institutions should be put in place.

Risk Management and Resilience: Governments should adopt a risk and resilience approach to FDP review, considering potential future shocks such as the energy transition and climate change impacts.

    • This involves assessing the project’s robustness to potential disruptions and considering the carbon intensity of various development options.
    • The Ministry of Finance should be informed of revenue streams under different scenarios. Expectation management is key.

Transparency and Communication: Governments should manage stakeholder expectations, and promote transparency by ensuring effective communication between the government, operator, and the public.

Flexibility and Vigilance: Governments should recognise that the FDP is subject to uncertainties and may require adjustments. The regulatory framework should allow for flexibility and for the government to remain vigilant in monitoring project activities to ensure they adhere to the approved FDP.

By adhering to these principles, new producer countries can strengthen their ability to manage petroleum resources, foster sustainable development, and maximise value for their citizens.