UK offers first batch of licenses in 33rd offshore oil & gas round to fortify energy security

UK’s regulator North Sea Transition Authority (NSTA) has awarded 27 licenses in areas with the potential to go into production more quickly than others to bolster Britain’s energy security. This is the first batch to be awarded from 115 applications in the 33rd offshore oil and gas licensing round, which is the highest number since the 29th licensing round in 2016/17. More blocks are also on the North Sea oil and gas horizon, subject to additional environmental checks.

After the 2019 round, a review into the future offshore oil and gas licensing regime was launched, as part of the wider plans of achieving net-zero emissions by 2050, and the annual licensing activity was paused. Things changed during 2022, 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.

With this at the forefront, the 33rd offshore oil and gas licensing round, which the North Sea Transition Authority 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 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 UK regulator is under the impression that the North Sea production has received “a significant boost” with the offer of 27 new licenses. Aside from this, six more blocks, which were also ready to be offered, have been merged into five existing licenses. All of the 258 blocks that have been applied for have been through the initial Habitat Regulation Assessment (HRA) and the blocks being awarded have been identified as not requiring further assessment.

Stuart Payne, NSTA Chief Executive, said: “Ensuring that the UK has broad options for energy security is at the heart of our work and these licenses were awarded in the expectation that the licensees will get down to work immediately. The NSTA will work with the licensees to make sure that where production can be achieved it happens as quickly as possible.”

Moreover, these licenses in the Central and Northern North Sea, as well as West of Shetland were awarded first to let operators press ahead with their plans to explore and develop oil and gas resources. In recent years, the average time from license award to production is around five years. This batch of license awards is part of the NSTA’s wider efforts to support the UK’s energy security options, which includes the licensing of offshore gas storages and engagement with industry on opportunities to reopen closed wells.

According to the regulator, there are currently 284 offshore fields in production in the UK North Sea and an estimated 5.25 billion boe in total projected production to 2050. While oil and gas currently contribute around three quarters of domestic energy needs, official forecasts show that, as Britain continues to transition, these fuels will play a role in the country’s energy mix for decades to come.

Therefore, a recommendation for the remaining 203 blocks will be made once the Habitat Regulation Assessment Further Appropriate Assessment process has been completed. The NSTA took into consideration other marine users throughout project lifecycles, including at license award and stewardship process stages.

Developing a site typically requires additional consents, including from the Department of Energy Security and Net Zero, and the regulator works closely with government, regulators, and other bodies such as The Crown Estate and Crown Estate Scotland to manage this process and to identify and mitigate as appropriate important spatial co-location considerations.

Claire Coutinho, UK’s Energy Security Secretary, remarked: “As recognized by the independent Climate Change Committee – we’ll continue to need oil and gas over the coming decades as we deliver net zero. It’s common sense to reduce our reliance on foreign imports and use our own supply – it’s better for our economy, the environment and our energy security.

“These new licenses are a welcome boost for the UK industry, which already supports around 200,000 jobs and contributes £16 billion to the economy each year – while advancing our transition to low-carbon technologies, on which our future prosperity depends.”