New licenses paving the way for ‘no cliff edge’ in UK oil & gas production

Britain’s trade body for the offshore energy industry, Offshore Energies UK (OEUK), has welcomed the award of new oil and gas licenses by the North Sea Transition Authority (NSTA), as a step in the right direction to strengthen homegrown energy security and jobs while the sector continues its expansion in wind, hydrogen and carbon capture and storage (CCS).

The NSTA awarded 27 licenses, 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. While welcoming the award of these licenses, OEUK points out that the UK’s oil and gas production supports 200,000 jobs.

In addition, a recent report from Robert Gordon University found the wider offshore energy workforce could increase further. However, this is contingent on Britain’s ability to deliver a managed transition that avoids a rapid decline in the domestic production of oil and gas before offshore wind and other projects are delivered at the scale required to deliver a net zero economy by 2050.

According to Offshore Energies UK, licensing is the first step taken by energy production companies with the regulator to find and produce homegrown supplies, managing the nation’s reliance on imports and safeguarding its energy workforce. Over the last decade, the average time between exploration and production in UK waters has been four years and eight months.

David Whitehouse, Offshore Energies UK Chief Executive, commented: “This announcement is a boost for UK energy security and for the 200,000 people in jobs supported by the offshore energy sector. These are the very people we need to deliver reliable supplies of homegrown energy produced in the UK, for the UK.

“We all recognize that our energy system must change, and our industry includes companies that are expanding into renewables while using their expertise to pioneer ever-cleaner energy production. The reality of the energy transition is that we need both oil and gas and renewables in an integrated system to protect the UK’s energy needs over the coming years.”

Currently, 75% of Britain’s energy needs are provided by oil and gas. The country is a net importer of oil and gas, which means it consumes more than it produces domestically. There are currently 284 active oil and gas fields in the North Sea. OEUK explains that around 180 of those will have ceased production by 2030 due to natural decline.

Bearing this in mind, Offshore Energies UK is adamant that the industry needs the churn of new licenses to ensure “no cliff edge in domestic production.” OEUK also warns that without fresh investment, the UK will be reliant on oil and gas imports for 80% of its needs by 2030.

Whitehouse further added: “Last year filling the fuel import gap cost the UK £117 bn. That’s a lot of money spent supporting the economic growth of other producing countries. With careful management and collaboration, the UK can become the gold standard of energy transitions. We can drive economic growth, reach our climate goals and avoid a future where we increasingly import our energy and export our jobs.

“Energy security is national security. We need pragmatic policy and political consensus if we are to realize £200 billion potential company investment in UK wind, hydrogen and carbon capture, and oil and gas production over this decade, with all the jobs and work for our supply chains this will bring.”

The UK trade body believes that Britain needs more oil and gas licenses, as the data from the NSTA shows the country only replaced 3% of production with new reserves in 2022, meaning that it only invested in 1 new barrel for every 33 existing barrels produced. As the UK is expected to close production from 20 fields this year, whilst only two will start producing, OEUK concludes that for every oil and gas well drilled, around three are closed.

While around 75% of the United Kingdom’s total energy comes from oil and gas, 44% of Britain’s gas comes from the North Sea, whilst produced oil plays an important role in meeting not only the country’s energy security but also the overall European energy security, where over 70% of the UK’s oil is used.

Many claim that new oil and gas production in UK waters will prevent Britain from reaching net zero by 2050, however, an analysis from the NSTA in July 2023 showed that the carbon footprint of domestic gas production was around one-quarter of the carbon footprint of imported liquified natural gas.

As the UK is a rapidly declining producer of oil and gas, OEUK believes 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.

“There is a constant churn in domestic production, meaning as reserves are depleted, licensed production is decommissioned and new licenses are required to simply maintain the rate of decline,” highlighted Offshore Energies UK.