OEUK: New oil and gas licences strengthen every sector of the UK

03/05/2024
David Whitehouse - CEO Offshore Energies UK at port of Aberdeen

OFFSHORE Energies UK says today’s offer of 31 new oil and gas licences to operators by the North Sea Transition Authority (NSTA) strengthens energy security and business confidence across all sectors as the expansion into wind, hydrogen and carbon capture and storage accelerates. 

The licences are chiefly for gas extraction from the southern North Sea, with the potential to come on stream to power and heat the UK’s businesses and homes within the next five years. They will make the UK less reliant on imported gas, which the NSTA has shown to be more carbon intensive. This means the licences will help to lower the nation’s carbon footprint as the industry works to build an attractive investment environment that can enable a homegrown energy transition and kickstart economic growth.

31 licences have been offered in the third tranche of the NSTA’s 33rd licensing round after rigorous environmental checks. This is important news for people across the industry and its supply chains, which support over 200,000 jobs up and down the UK.

A total of 82 offers to 50 companies have now been made in the round which attracted 115 bids from 76 companies across 257 blocks and part-blocks. The licences offered in the round have the potential to add an estimated 600 million barrels of oil equivalent (mmboe) up to 2060, or 545 mmboe by 2050.

Offshore Energies UK’s CEO David Whitehouse comments:

“New oil and gas licences benefit every sector in the UK. They will help to bring secure supplies of homegrown gas into our grid, reducing our reliance on more carbon intensive imports from overseas. These licences will help to protect jobs and power and heat the nation’s firms and homes as we build the next generation of low carbon infrastructure here in the UK.

“In this general election year, we face a choice: we can build a homegrown energy transition and kickstart economic growth by backing our people, our offshore firms and our world class supply chain, or we can import even more energy and fail to grow our new wind, hydrogen and carbon capture industries. Our energy security, economic growth, and thousands of jobs in almost every parliamentary constituency up and down the UK are at stake.

“We all recognise that our energy mix must change, and our sector is ramping up renewables and accelerating the drive to net zero. But this journey will take time. Meanwhile our North Sea basin is naturally declining. We have over 280 oil and gas fields but by the end of the decade 180 of them will have stopped producing.  We need the churn of licences for an orderly transition that supports jobs and communities across the country and meets our energy needs.”

How many active oil and gas fields are there in the North Sea? 

There are currently over 280 active oil and gas fields in the North Sea and by 2030 around 180 of those will have ceased production due to natural decline. The industry needs new licences to ensure no cliff edge in domestic production. OEUK has warned that without fresh investment the UK will be reliant on oil and gas imports for 80% of its needs by 2030.

Why does the UK need more oil and gas licences? 

Data from NSTA shows the UK only replaced 3% of production with new reserves in 2022, meaning that only 1 new barrel was invested in for every 33 existing barrels produced today (source: NSTA Oil and Gas resources report)

OEUK expects that 20 fields will have stopped producing last year, whilst only two will have started producing. For every one oil and gas well drilled, around three are closed.

Will the oil and gas produced in the UK be used in the UK? 

Around 75% of the UK’s total energy comes from oil and gas.

Around half of UK gas comes from the North Sea, while produced oil plays an important role in meeting UK, as well as European energy security, where over 70 per cent of the UK’s oil is used (source: OEUK Economic Report 2023).

Will new oil and gas production in UK waters prevent the UK from reaching net zero by 2050? 

Analysis from the NSTA in July showed that the carbon footprint of domestic gas production is around one-quarter of the carbon footprint of imported liquified natural gas.

As the UK is a rapidly declining producer of oil and gas, new oil and gas licences reduce the rate of declining UK supplies, rather than increase it above current levels – so that the UK remains on track to meet net zero by 2050.

Has anything altered between tranche 2nd & 3rd announcements from the 33rd Licence Round?

There is a new clause which relates to co-location for certain blocks will be included in these offers. OEUK have been advised other seabed stakeholders, Crown Estate, Crown Estate Scotland and the offshore Wind Lease holders have been informed at the same time of this new clause.

The NSTA advised “As part of the assessment the NSTA has identified a number of awards that have direct or very close proximity to The Crown Estate or Crown Estate Scotland Wind Farm Leases. “

Over the preceding months there has been significant engagement between the NSTA and both these agencies on how co-location can be managed.

Does each licence represent a new oil or gas field? 

No. Each license does not represent a new oil field. Companies require licenses for a range of activity in so-called “blocks” – carefully mapped sections of the seabed in UK waters – starting from seismic and initial exploratory work through to production, either near existing infrastructure in previously known fields or in new fields.

Licensing is a normal part of most energy production regimes and is used in the UK to manage the development of oil and gas, wind and most recently, carbon capture projects. It is part of a bigger process which companies must undertake to explore, analyse, produce and then eventually decommission energy production.

There is a constant churn in domestic production, meaning as reserves are depleted, licensed production is decommissioned, and new licences are required to simply maintain the rate of decline. The UK’s oil and gas regime is heavily regulated, with applicants for licences subject to strict commercial, environmental and health and safety conditions.

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