UK government grants 27 new oil and gas licences in the North Sea

The UK government has announced a new round of oil and gas exploration licences in the North Sea, sparking criticism from environmentalists and questions over energy security.

What are the new licences and why are they controversial?

  • The UK government has offered 27 new licences for oil and gas exploration in the North Sea, covering 113 blocks or part-blocks.
  • The licences are part of the 33rd round of offshore licensing, which opened in October 2022 and received 115 applications from 76 companies.
  • The government said the new licences will help reduce the UK’s reliance on foreign imports and support the transition to net zero by 2050.
  • However, environmental campaigners, researchers and MPs have challenged the decision, arguing that it is incompatible with the UK’s climate commitments and will not lower energy bills for consumers.

How does oil and gas exploration work in the UK?

  • The UK’s oil and gas industry is regulated by the North Sea Transition Authority (NSTA), which was established in 2021 to oversee the sector’s transition to net zero.

uk north sea oil rig

  • The NSTA grants licences for exploration and production of oil and gas on the UK Continental Shelf (UKCS), which covers an area of about 600,000 square kilometers around the UK.
  • The licences are awarded through competitive bidding rounds, which usually take place every two years. The licence holders have to comply with environmental, safety and fiscal regulations.
  • The UKCS currently has 284 offshore fields in production, producing about 1.6 million barrels of oil equivalent per day. The UK is a net importer of oil and gas, importing about 60% of its gas and 40% of its oil.

What are the potential benefits and risks of the new licences?

  • The government said the new licences will help ensure the UK’s energy security, which has become more important amid rising global prices and supply disruptions.
  • The government also said the new licences will support thousands of jobs in Scotland and foster innovation in green technologies, such as carbon capture and storage (CCS) and hydrogen.
  • However, critics said the new licences will lock in more fossil fuel production and emissions, undermining the UK’s efforts to reach net zero by 2050.
  • Critics also said the new licences will not guarantee lower energy prices for consumers, as the oil and gas produced will be sold on the international market, not reserved for domestic use.

How does the UK compare to other countries on oil and gas exploration?

  • The UK is one of the few countries that still allows new oil and gas exploration, despite its pledge to reach net zero by 2050.
  • According to a report by Global Witness, a campaign group, only four other countries – Brazil, Mexico, Norway and Russia – have issued more offshore exploration licences than the UK since the Paris Agreement was signed in 2015.
  • The report also found that the UK has approved more than twice as much oil and gas production as it can afford under its carbon budget, which limits the amount of emissions it can emit to meet its climate goals.
  • Some countries, such as France, Denmark and New Zealand, have banned or phased out new oil and gas exploration altogether, while others, such as Ireland and Spain, have imposed moratoriums or restrictions.

What will happen next with the new licences?

  • The new licences are subject to further assessments and approvals before any drilling can take place. The licence holders have to submit environmental statements, development plans and decommissioning proposals for each project.
  • The licence holders also have to demonstrate that they have taken into account the social and economic impacts of their activities, as well as the potential for CCS and hydrogen production.
  • The NSTA said it will monitor the progress of the licence holders and ensure that they comply with the net zero target. It also said it will review its licensing policy in light of the changing market conditions and climate ambitions.
By Ishan Crawford

Prior to the position, Ishan was senior vice president, strategy & development for Cumbernauld-media Company since April 2013. He joined the Company in 2004 and has served in several corporate developments, business development and strategic planning roles for three chief executives. During that time, he helped transform the Company from a traditional U.S. media conglomerate into a global digital subscription service, unified by the journalism and brand of Cumbernauld-media.

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