BP, Shell, TotalEnergies, and Equinor among recipients of second license batch in UK’s 33rd oil & gas round

The UK regulator, North Sea Transition Authority (NSTA), has offered 24 licenses across 74 blocks and part-blocks, which are situated in the Central North Sea, Northern North Sea, and West of Shetland areas. This is the second tranche to be awarded from 115 applications in the 33rd offshore oil and gas licensing round, bringing the total number of licenses awarded so far to 51. The latest batch brought provisional new licenses to 17 oil and gas players, including Shell, Equinor, BP, TotalEnergies, and NEO.

The 33rd offshore oil and gas licensing round opened on October 7, 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 115 bids across 258 blocks and part-blocks from 76 companies.

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. Greenpeace lawyers resorted to court action to challenge the UK government’s decision to greenlight a new oil and gas licensing round, citing climate concerns.

The NSTA awarded 27 licenses in October 2023, as part of the first batch after the 33rd offshore oil and gas licensing round, in quicker-to-production areas with more to follow subject to additional environmental checks. As the UK is a rapidly declining producer of oil and gas, Offshore Energies (OEUK) claims that new oil and gas licenses reduce the rate of declining supplies, rather than increase it above current levels – so that the country remains on track to meet net zero by 2050.

In line with this, the NSTA claims that the second tranche of license awards will lend a helping hand in ensuring job security and providing benefits to the local and wider economy. Following additional environmental checks by OPRED, including Habitat Regulation Assessment (HRA) Appropriate Assessments, the remaining blocks, the majority of which are in the Southern North Sea and East Irish Sea, will be offered to strengthen Britain’s energy security.

Commenting on the second batch of licenses, the NSTA spokesperson said: “This latest batch brings total offers so far to 51, with more to come once the appropriate environmental checks are complete. These licenses have the potential to make a significant contribution to the UK in energy production and economic benefits, and the NSTA will work alongside the licensees to help bring them into production as quickly as possible.”

Aside from demonstrating the ongoing appetite within the industry to explore the UK Continental Shelf (UKCS), the 33rd  round is perceived to be a key part of the North Sea Transition Authority’s drive to support the oil and gas industry, which currently contributes around three-quarters of domestic energy needs. The industry is expected to continue to do so even as demand is reduced, based on current forecasts.

Graham Stuart, Minister for Energy Security and Net Zero, highlighted: “We will continue to need oil and gas over the coming decades, so it is common sense to make the most of our own resources – with domestically produced gas almost four times cleaner than importing liquefied natural gas from abroad. These new licences will strengthen our energy security now and into the future, while also helping boost our economy, by backing an industry that supports 200,000 jobs and is worth £16 billion each year.”

The NSTA’s analysis shows that the average time between licensing and first production is now close to five years, which means that licenses awarded now could be put into production mode before the end of the decade. While providing skilled jobs and supporting the economy, the UK regulator believes that domestic energy supply can play an important role in cutting greenhouse gas emissions and allowing the UK to continue to decarbonize domestic production.

With the upping of the decarbonization ante, technological innovation is taking the North Sea by storm, as carbon storage, for which 21 licenses were awarded in 2023, and hydrogen, for which the NSTA has been named the offshore transport and storage regulator, are anticipated to play a key role in supporting the drive to reach net zero by 2050, spurring further innovation.

Furthermore, the NSTA’s data confirms that production emissions have been cut by more than a fifth between 2018 and 2022, with projections indicating the sector is on track to meet reduction targets of 10% by 2025 and 25% by 2027, as agreed in the North Sea Transition Deal in 2021.

Last month, the NSTA granted development and production consent for the Shell-operated Victory gas field, supporting a project with an estimated total net gas production equivalent to the average gas demand of 4.6 million UK homes for one year, or all Scottish homes for 1.5 years.

With the final investment decision (FID) now out of the way, the Victory development will feature a single subsea well which will be tied back to the existing infrastructure of TotalEnergies’ Greater Laggan Area (GLA) system, using a new 16 km pipeline.