OEUK: New North Sea oil, gas licenses to strengthen domestic energy security
(WO) – Offshore Energies UK says the award of new oil and gas licenses by the North Sea Transition Authority (NSTA) will strengthen homegrown energy security as the sector continues its expansion in wind, hydrogen and carbon capture and storage.
A total of 27 licenses have been offered in quicker-to-production areas with more to follow subject to additional environmental checks.
Oil and gas production supports 200,000 jobs in the UK today. A recent report from Robert Gordon University found the wider offshore energy workforce could increase further if the UK delivers 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.
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 world-class energy workforce. Over the last decade, the average time between exploration and production in UK waters has been four years and eight months.
Today, 75% of the UK’s energy needs are provided by oil and gas. The UK is a net importer of oil and gas, meaning it consumes more than it produces domestically.
There are currently 284 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 the churn of new licenses 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.
Offshore Energies UK Chief Executive David Whitehouse commented, “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.
“Last year, filling the fuel import gap cost the UK £117bn. 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.
Today’s announcement comes over a year after the 33rd Licensing round was opened in October 2022, with applications closing at the end of January 2023.
Why does the UK need more oil and gas licenses? 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 bbl produced today (source: NSTA Oil and Gas resources report)
The UK is expected to close production from 20 fields this year, while only two will start 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. 44% 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% 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 licenses 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.
Does each license represent a new oil field? No. 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, analyze, 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 licenses are required to simply maintain the rate of decline.
The UK’s oil and gas regime are heavily regulated, with applicants for licenses subject to strict commercial, environmental and health and safety conditions.
Lead image: ExxonMobil North Sea platform