UK plans first North Sea oil and gas licensing round since 2020

The UK’s North Sea regulator plans to hold the first oil and gas licensing round since 2020 this year, as the country races to secure more domestic energy supplies in the wake of the Ukraine war.

Andy Samuel, chief executive of the Oil and Gas Authority, told the Financial Times the regulator was preparing licences that include existing discoveries, which would be “pretty much ready to go” if oil and gas companies would be willing to exploit them.

Issuing new licences to drill for oil and gas in UK waters will be highly controversial; climate campaigners argue that the North Sea fossil fuel industry should be wound down and investment prioritised in clean energy technologies.

But prime minister Boris Johnson hopes fossil fuel companies will be able to increase indigenous production as he prepares to publish an updated energy strategy later this month aimed at bolstering the UK’s domestic energy sources.

The UK, along with its European allies, is racing to phase out Russian oil and gas and reduce its exposure to highly volatile international oil and gas markets, which are forcing up domestic energy bills to record highs and exacerbating a cost of living crisis.

The OGA, which on Monday is changing its name to the North Sea Transition Authority (NSTA), has not been able to hold a licensing round since 2020, when the government undertook a review of whether its policies were compatible with climate objectives.

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Ministers have since been drawing up a “climate compatibility checkpoint” against which they promised all future licensing rounds would be tested. The draft text for those checks was hastily rewritten last week to include clauses allowing the government to bypass environmental considerations in the event of urgent national security concerns.

When asked when he believed the regulator would be able to resume licensing, Samuel replied: “Certainly this year”.

“The team [at the NSTA] are getting ready some packages of licences that have discoveries that are pretty much ready to go,” he said.

Samuel insisted the content of the climate compatibility test, and whether energy security concerns should trump emissions targets, was a “policy matter” for the government.

But he insisted he did not believe the two worked “in opposition” given the UK’s dependence on overseas imports of oil and gas, which are often produced at a higher cost to the environment. Last year the UK met 40 per cent of its gas requirements from domestic supply.

“We know that our good developments [in the North Sea] have a lower carbon footprint and we need them,” Samuel said.

Climate groups and some academics have questioned Johnson’s courtship of fossil fuel producers given the North Sea is one of the most mature oil and gas basins in the world and is currently forecast to decline at an annual rate of 5-7 per cent. They have also pointed out it can take years after a reservoir is discovered to produce any oil or gas.

Samuel accepted the North Sea was a “declining basin” but he argued the regulator’s work to improve production efficiency since its establishment in 2015 had helped to slow the pace of decline.

His teams were again examining a “range of opportunities”, such as looking at older fields to see if some wells were no longer producing when further barrels could be squeezed out, or whether new wells in those areas could be drilled, he said.

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Source: Financial Times