Offshore Energies UK, the leading trade body for the sector, says today’s award of new oil and gas licences 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 licences 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 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.
Offshore Energies UK Chief Executive David Whitehouse comments:
“This announcement is a boost for UK energy security and for the 200,000 people in jobs supported by the offshore energy sector. These are the very people we need to deliver reliable supplies of homegrown energy produced in the UK, for the UK.
“We all recognise 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.
“Energy security is national security. We need pragmatic policy and political consensus if we are to realise £200billon potential company investment in UK wind, hydrogen and carbon capture, and oil and gas production over this decade, with all the jobs and work for our supply chains this will bring.”
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 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)
- The UK is expected to close production from 20 fields this year, whilst 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 per cent of the UK’s total energy comes from oil and gas.
- 44 per cent of UK gas comes from the North Sea, whilst 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.
Does each licence represent a new oil field?
- No. Each licence does not represent a new oil field.
- Companies require licences 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.
- Licencing 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, licenced 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.
Notes to editors
Please see attached image of Dave Whitehouse and a diagram of the licensing and development process
- Over 75% Proportion of UK’s total energy derived from oil and gas
- Around 220,000 Number of jobs supported by the offshore industry
- Almost £30 billion Value of the UK oil and gas industry to the UK economy
- £11bn Estimated oil and gas production taxes paid to the UK exchequer in 2022/23
- Around 77bn cubic metres (bcm) UK’s annual gas consumption. Consumption so far in 2023 is 9% lower
- 1,150 cubic metres Average UK gas consumption per person
- 34 bcm UK gas production in 2022. Production so far in 2023 is 6% lower
- 44% Proportion of UK gas that came from the North Sea
- 61 million (m) tonnes UK oil consumption in 2022. Consumption so far in 2023 is 4% higher
- 0.9 tonnes Average UK oil consumption per person
- 41m tonnes UK oil production. Production so far in 2023 is 12% lower
- 67%: UK oil production equated to around two-thirds of consumption
- 13.8 GW Total UK offshore wind capacity – the second highest in the world. Supplying 15% of UK electricity
- 90 GW Overall UK offshore wind capacity potential
- 50 GW UK 2030 offshore wind capacity target.
- 20-30 million tonnes/year CO2 storage The government’s 2030 CCS target – with four cluster projects now supported
- 10 GW of low carbon hydrogen UK government 2030 low carbon hydrogen target
- Wells, in 2022 there were three times as many wells being decommissioned compared to production adding wells