Court fight on UK govt’s hands over oil & gas licensing round

The UK’s launch of its 33rd offshore oil and gas licensing round, undertaken to strengthen the country’s energy security against the backdrop of the global energy woes triggered by the Ukraine crisis, sparked the ire of environmental activists. This has now culminated in a lawsuit, as Greenpeace has decided to take the UK government to court over – what it deems to be – an “unlawful” oil and gas decision.

Following the 2019 round, a review into the future offshore oil and gas licensing regime was launched, as part of the wider aim of achieving net-zero emissions by 2050, and the annual licensing activity was paused. However, things changed last year, spurned by the global energy crisis which swept across the world, as countries scrambled, especially in Europe, to boost energy security and stave off a gas crunch.

The latest licensing process, which the UK regulator, North Sea Transition Authority (NSTA), believed would significantly boost the UK’s energy security, opened on 7 October 2022 and offered acreage across the North Sea – the West of Shetland, Northern North Sea, Central North Sea, Southern North Sea, and East Irish Sea – including four priority areas with known hydrocarbons.

The UK regulator highlighted in January 2023 that there was “very keen interest” in these areas that could see production in as little as 18 months, attracting a total of 115 bids across 258 blocks and part-blocks from 76 companies. This is similar to the 32nd licensing round in 2019, which received 104 applications for 245 blocks and part-blocks, when a total of 768 blocks and part-blocks were offered, compared with 931 in the most recent round.

This licensing round was launched amid significant pressure from environmentalists to transition to cleaner sources of energy. Multiple protests were held in the UK by climate activists seeking an end to fossil fuel projects and investments. These activists claim that the answer to tackling the energy and climate crises lies in ramping up renewable investments.

The UK government’s plans to support several energy projects, pledging to speed up efforts to unlock additional investments and cut the red tape to make it quicker to deliver these five oil and gas developments as well as several carbon capture and storage (CCS), hydrogen, and offshore wind projects also found their place in the environmentalists’ crosshairs.

According to Greenpeace, its lawyers are now in court, challenging the UK government’s “reckless decision” to greenlight a new oil and gas licensing round, without properly checking the damage it will do to the climate. The group claims that the government ignored over 80 per cent of the carbon emissions these licences will produce when the oil and gas are actually burnt.

To hammer home the importance of climate action, Greenpeace makes a reference to the heatwaves that have besieged the world this summer, with thousands of holidaymakers evacuated over the weekend from Greece because of wildfires while large parts of Europe, Asia and North America are burning up.

The climate activists claim that even though these weather conditions are directly caused by carbon emissions generated by the fossil fuel industry, the UK government is still planning to hand out up to 130 new oil and gas licences in the North Sea, adding fuel to the flames. Due to this, Greenpeace is urging the government to commit to no new oil and gas, as climate experts say that new oil and gas will be a disaster for the climate.

Furthermore, Greenpeace underlines that new oil and gas will not do anything to bring down energy bills, adding: “Whether it’s soaring energy bills, spiking food prices, or being evacuated from a burning country, the climate crisis is affecting us all in very tangible ways.”

With elections coming up, Labour’s energy roadmap – if the party wins these elections – envisages making the UK a clean power by 2030 with the help of marine and tidal energy, offshore and onshore wind, solar, and nuclear power.

When news about Labour’s plans to block all new North Sea oil and gas developments started making the rounds, they spurred outrage in certain circles over potentially exposing the UK to more costly imports, as a recent report warned that Britain might need to import 80 per cent of its oil and gas by 2030 without new investment in domestic production.

Many believe that the turn to renewables should be a gradual shift in investment rather than moving away from new oil and gas developments right away but the UK’s windfall tax hike on oil and gas producers’ profits along with political tensions and uncertainties over the sector’s future are perceived as additional roadblocks to investment in domestic oil and gas. 

Greenpeace, which is championing a pivot to renewables, underlines: “What we need is a government that will invest in a clean, affordable energy system fit for the 21st century with an upgraded grid, home insulation and cheap, clean renewable power. This is the only way we can tackle the cost of living crisis, guarantee our energy security, and keep a safe climate.

“We refuse to sit around and watch this government throw more fuel on the fire. Politicians who have the courage to tackle these crises together will be rewarded at the ballot box when they offer people real leadership and a safe future for everyone.”

This is not the UK government’s first brush with the law when it comes to climate action, as another legal battle awaits on the horizon, with three organisations – Friends of the Earth, ClientEarth, and Good Law Project – setting the wheels into motion to take the country to court for the second time in two years over its “feeble and inadequate” strategy for tackling climate change and “weak” net-zero plans.

These are not the only challenges the UK is grappling with as it is also facing an upskilling crisis in the energy transition era while it works on building a workforce capable of bringing a low-carbon and green energy future to life. These woes are perceived to be damaging the country’s chances to hit net-zero goals.

Meanwhile, Offshore Energies UK (OEUK), together with Robert Gordon’s University (RGU), recently produced a roadmap, titled Harnessing the Potential, that outlines how the UK can support jobs, economic growth, and innovation to build and deliver the changes required for a net-zero energy system of the future. The roadmap sets out detailed industry, government and regulatory action required in six key areas to build, enable, and then grow and sustain UK capabilities from 2022-2035.

It also points out that the wider offshore energy sector, including oil and gas operators and wind developers, could invest up to £200 billion (almost $256.5 billion) in UK energy production and technology projects in the remainder of this decade to help deliver the government’s energy targets.

Over £90 billion (nearly $115.5 billion) of this could go to UK supply chain companies over the next decade if the roadmap is delivered and both government energy production and local content targets are met. The opportunities include the development and licensing of new technologies, the production of equipment, the installation and maintenance of assets, and the eventual decommissioning of offshore energy projects.

OEUK explains that the potential to boost the UK offshore energy supply chain through the roadmap is explored through three scenarios with each considering the impact on the UK supply chain of both the scale of energy projects and the percentage of which is delivered by UK companies over the coming decade.

In line with this, the best case sees full delivery of the British Energy Strategy, with 50 per cent of those projects delivered by the UK supply chain. This would see 50 GW of offshore wind capacity, 10 GW of hydrogen production, 30 million tonnes of carbon captured and stored per year and the prioritisation of domestic oil and gas production over imports during this period.

On the other hand, a low investment scenario, where there is no new oil and gas development – as per environmentalists’ demands – and a slow pace of investment in new energies, would deliver £60 billion (close to $77 billion) to UK supply chain companies. Across all scenarios, the tool shows that oil and gas will continue to represent the biggest supply chain opportunity until at least 2027.

Katy Heidenreich, OEUK Supply Chain and People Director, stated: “As we build this future, there is no simple choice between oil and gas on one hand and renewables on the other. The reality is that both are needed to keep the lights on and grow the economy. With oil and gas expected to remain a sizeable chunk of supply chain opportunities until at least 2027, we can understand why so many supply chain companies are telling us they are worried about political support for the sector.

“The supply chain needs a pragmatic and long-term approach if it is to thrive here. We need politicians of all parties to support the roadmap and our plans for at least half of these projects to be delivered in the UK. This means putting the UK workforce and industrial capabilities at the heart of decision-making on energy, supporting enduring policies that encourage companies to invest over decades, and championing the talent on our doorsteps to a global market.”