The UK’s climate announcement could herald a resurgence in North Sea oil and gas exploration

September 21, 2022

The government’s decision to release the results of its ‘Climate Compatibility Checkpoint’ consultation on new oil and gas projects will boost UK energy security while minimizing greenhouse gas emissions, Offshore Energies UK said today.

Publication of the consultation results – expected shortly - will open the way for hundreds of ‘blocks’ (areas of the UK's surrounding seabed) to be offered for new oil and gas exploration and production licenses.

They could include areas off East Anglia, Yorkshire and north-east England, and in the Irish Sea, plus others off Scotland and the northern isles of Shetland and Orkney.

It follows the government’s British Energy Security Strategy, published earlier this year, which promised just such a new licensing round. Prime minister Liz Truss said this month that she hopes more than 100 licenses will be awarded.

Licensing rounds are usually annual events but the process has been on hold since 2020 pending the results of the Climate Compatibility Checkpoint Consultation. Just five exploration wells were drilled in 2021 – the lowest number ever.

The consultation outlined possible measures to ensure future UK gas and oil developments are in keeping with the nation’s climate emissions reduction targets. The government was expected to publish its conclusions earlier this year but was delayed by recent events such as the Conservative leadership contest.

OEUK has, however, been pressing ministers to release the consultation results as soon as possible – because the industry relies on finding new sources of gas and oil simply to maintain production. The last (32nd) licensing round was held in 2020 when 113 licenses were awarded.

OEUK has warned that delays in licensing could lead to an eventual decline in UK oil and gas output. This would increase the UK’s dependence on imports from other countries at a time of global energy shortages.

OEUK’s Economic Report, published on September 7, warned: “it is crucial that there is a new licensing round as soon as possible after the announcement of the Climate Compatibility Checkpoint … Just five exploration wells were drilled last year, which was the lowest since the North Sea sector was opened up almost 60 years ago. Exploration, and subsequent production is crucial to achieving the UK’s oil and gas potential and reducing the energy import gap.”

Once the consultation is published the North Sea Transition Authority, the government body which oversees and licenses energy-related offshore activities, is expected to announce a new oil and gas exploration licensing round, possibly within days.

Plans for the checkpoints were announced in mid-2021. They set out a series of tests for future offshore developments to ensure they are aligned with the UK’s climate objectives. A key focus is on minimizing the greenhouse gas emissions generated by the production and processing of gas and oil. Such emissions account for about 4% of all UK emissions.

The industry has supported the proposals enthusiastically. It has already cut production emissions by about 20% since 2018 and pledged to halve them by 2030 and reduce them to zero by 2050. It means new installations to extract and process oil and gas discovered in UK waters will be among the world’s cleanest and most efficient.

Mike Tholen, OEUK’s acting chief executive, said: “The UK currently relies on gas and oil for 75% of its total energy. Producing our own energy cleanly gives us more control over our own economy and makes us less dependent on other countries.

“That is always important but never more so than now when we face a global crisis over energy supplies. We need to move to a low carbon future but that will take decades – during which we will need continuing supplies of gas and oil.

“We need new licenses now because the UK continental shelf is what we call a mature basin where many existing fields are in gentle decline.

“That means we rely on finding new oil and gas resources simply to maintain production at current levels. We need new exploration and production licenses so that we can find those reserves. Delays in issuing licenses could lead to reduced gas and oil production – and that would damage our energy security.

“New licenses also help maintain continuity for the energy operators and for our vital supply chain companies which, between them, employ nearly 200,000 people.

“They also mean that the UK and Europe are less likely to have to scramble for international supplies or return to using other fossil fuels, with all the implications that would have for cost, emissions, and national security.”

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