Top tips for oil and gas business in 2020

By Laura Petrie, Brodies LLP, November 2019.

What’s in store for your business in 2020? The following tips outline some of the key issues that should be kept in mind when planning for next year:

1. Start early. Not the New Year celebrations, but preparation for IR35 changes that will significantly impact sector hiring practices from April 2020. Companies need to audit their use of off-payroll workers, establish how they will assess and communicate with contractors and create new policies and processes for future engagements which meet the requirements of the (still) draft legislation.
2. Be inquisitive. Use of artificial intelligence and automation is becoming increasingly prevalent – whether in relation to ROVs or the IT systems used to analyse data or automate processes. It's essential that organisations understand the risks when deploying such technology. Make sure your business is asking the right questions and getting the right advice - how is the system trained? How do you avoid algorithmic bias? Who is liable for errors or mistakes? How do you ensure compliance with data protection laws when making decisions about individuals?
3. Check employment docs. From 6 April 2020 the rules regarding written statements of employment particulars will change. It will now apply to workers (those whose employment rights are between self-employed and employed) as well as employees and will become a “day 1 right”. Statements must be issued no later than the start of the engagement and include additional information including terms and conditions relating to hours of work, details of all paid leave (i.e. maternity leave) and details of training you provide or require the individual to undertake.
4. Get secured. With effect from April 2020, sums due to HMRC on the insolvency of individuals and corporates will enjoy a “secondary” preferential ranking. This means that VAT and “relevant deductions” will have priority over sums due to floating charge holders but also over ordinary unsecured creditors, including suppliers and other trade creditors. Relevant deductions are taxes the debtor is required to deduct from payments to any other person and pay to HMRC, i.e. PAYE (including student loan repayments); employee National Insurance Contributions and Construction Industry Scheme deductions. This could have implications for fields where decommissioning security agreements have not yet been put in place and also high value contracts that don’t include performance and payment security mechanisms.
5. Train and Re-train. Rig and vessel reactivation (from warm or cold stack) is becoming more commonplace as the industry gets back to business but also creates “rust risk”. With equipment, this can be addressed via survey then repair or replacement, but ‘rust’ among the crew - due to lack of familiarity with equipment, procedures, and co-workers - creates other risks. Re-training, familiarisation and monitoring of the crew is key to ensure compliance with health and safety regulations.
6. Be vigilant. The high flammability of lithium ion batteries (those used within smartphones/tablets) remains a concern for the industry. This is a primary risk with helicopters due to the limited fire suppressant or firefighting equipment available on board. A recent check in Aberdeen showed 20% of landings had a live piece of equipment on board with the power switched on. The message is clear: be vigilant; turn off your device.
7. Go digital. Digitalisation is identified as one of the primary building blocks of improved efficiency. In order to meet the decommissioning cost reduction targets proposed by the Oil and Gas Authority and the principles for improving the industry as part of the Vision 2035 campaign, digitalisation of the supply chain (and related procurement processes) needs to be a key focus of the industry over the next few years.
8. Update assessments. Make sure that bribery and tax evasion risk assessments are conducted on the organisation's operations. The risk assessment is a vital part of an effective, proportionate compliance programme and recent case law indicates that a defence to corporate failure to prevent offences may not be possible without it.