UK opens its first oil and gas licensing round since 2019 to boost energy security

UK government has launched the 33rd offshore oil and gas licensing round, making 898 blocks and part-blocks available in an effort to boost the country’s energy security amid the current energy crisis.

This is the country’s first licensing round since 2019 when the 32nd round was launched. After that round, a review into future offshore oil and gas licensing regime was also launched, as part of the wider aim of achieving net-zero emissions by 2050, and the annual licensing activity was paused.

The review was supposed to ensure the government has the information needed to plan for future oil and gas production in the UK, in a way that is aligned with tackling climate change.

Now, following the lift of shale ban and the show of support for the new round by the new government, the country’s regulator, the North Sea Transition Authority (NSTA), is inviting applications for licences to explore and potentially develop 898 blocks and part-blocks in the North Sea, which may lead to over 100 licences being awarded.

To encourage production as quickly as possible, the NSTA has identified four priority cluster areas in the Southern North Sea, which have known hydrocarbons, are close to infrastructure and have the potential to be developed quickly – ­and will seek to license these ahead of others. Applicants will be encouraged to bid for these areas so they can go into production as soon as possible.

The average time between discovery and first production is close to five years and falling, according to NSTA analysis.

The round is the latest element in the NSTA’s ongoing work with the industry to ensure the security of supply. Earlier this year, leading operators were asked to supply details of their production and investment plans and to look at how they might go further and faster wherever possible.

Other measures include licensing the Rough gas storage facility and encouraging operators to look again at reopening closed wells.

The UK regulator emphasised that the drive to reach net zero greenhouse gas emissions by 2050 continues alongside the drive for energy security and they support each other as new developments tend to be significantly lower emitting. Production emissions have been cut by more than a fifth between 2018 and 2021. The NSTA underlined that projections indicate the sector is on track to meet reduction targets of 10 per cent by 2025 and 25 per cent by 2027 – agreed in the North Sea Transition Deal in 2021.

Acreage will be offered in the West of Shetland, Northern North Sea, Central North Sea, Southern North Sea, and East Irish Sea. To support bids, the NSTA is publishing data packs with summaries of key prospects and discoveries to stimulate exploration and encourage new opportunities.

The opening of the licensing round follows the publication of the Climate Compatibility Checkpoint and the Strategic Environmental Assessment (OESEA4).

The application period will run until 14:00 hrs GMT on Thursday 12 January 2023, during which time applicants will be able to assess the opportunities and make applications from early October. It is expected that the first licences will be awarded from the second quarter of 2023.

The NSTA intends to award blocks in tranches with those that have the potential to produce quickly taking precedence, subject to any requirement for further environmental appropriate assessments.

This latest licensing round is being launched against the backdrop of the current energy crisis triggered by the war in Ukraine and amid significant pressure by environmentalists to transition to cleaner sources of energy. During this week only, a number of protests were held in the UK by environmentalists 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.

Dr Andy Samuel, NSTA Chief Executive, said: “Security of supply and net zero should not be in conflict. The industry has committed to halving upstream emissions by 2030 and investing heavily in electrification, carbon storage and hydrogen. Signs are promising so far – our first carbon storage round closed last month with 26 applications from 19 companies across all the areas we offered.”

Business and Energy Secretary, Jacob Rees-Mogg, said: “Putin’s illegal invasion of Ukraine means it is now more important than ever that we make the most of sovereign energy resources, strengthening our energy security now and into the future.

“Ensuring our energy independence means exploiting the full potential of our North Sea assets to boost domestic production – recognising that producing gas in the UK has a lower carbon footprint than importing from abroad.”

The UK government has also recently announced support for a number of energy projects, pledging to speed up efforts to unlock additional investments and cut the red tape to make it quicker to deliver these. As a result, five oil and gas developments as well as several carbon capture and storage (CCS), hydrogen, and offshore wind projects will be accelerated.