The UK government’s North Sea Transition Authority (NSTA) on Monday awarded 27 new licences in the 33rd oil and gas licensing round in areas prioritised because they have the potential to be brought into production more quickly than other assets.
There were 14 operators named by the NSTA, including global majors Shell, TotalEnergies, Equinor and Eni.
The others were Anasuria Hibiscus, Athena Exploration, Bridge Petroleum, DNO, Ithaca Energy, Neo Energy, Ping Petroleum, Tailwind Energy and Tangram Energy.
All 14 companies have some degree of experience in the UK.
There were two new entrants in the round in the shape of Norwegian giant Aker BP and Australia’s Triangle Energy.
BP and Dana Petroleum were also in on the act as non-operating joint venture partners.
One of the first confirmed awards was by Norwegian operator DNO which, with joint-venture partner Aker BP, landed blocks 9/9f, 9/10c, 9/14c and 9/15d. DNO’s UK subsidiary will operate the area, which is contiguous to the Norwegian maritime boundary and just west of the Aker BP-operated Alvheim hub offshore Norway.
The offshore UK area also comprises the Agar discovery from 2018, in which DNO held a 25% interest until it was relinquished in 2020.
DNO said technical work associated with the area would involve acquiring additional 3D seismic and potentially reprocessing the data to reduce risk and volume uncertainty. The initial phase will take up to two years. Then, a decision will be made on committing to a well.
In addition to these 27 licences, six more blocks, which were also ready to be offered, have been merged into five existing licences.
All of the 258 blocks that were applied for from the 33rd round, which was launched last October, have been through the initial Habitat Regulation Assessment. The blocks awarded on 30 October have been identified as not requiring further assessment.
These licences in the central and northern North Sea, and West of Shetland, were awarded as a first batch to let operators progress their plans to explore and exploit oil and gas resources. In the past decade, the average time from licence award to production in UK waters has been four years and eight months.
A second batch of blocks will be awarded.
The 33rd round comprised 931 blocks and part-blocks. In total, the NSTA received 115 applications from 76 companies for 258 blocks or part-blocks when applications closed on 12 January 2023.
The regulator noted that was the highest participation since the introduction of the Innovate Licences in the UK’s 29th Round in 2016-2017.
Importance of oil and gas
There are currently 284 offshore fields in production in the UK North Sea and an estimated 5.25 billion barrels of oil equivalent in total projected production to 2050, according to the NSTA.
However, by 2030 about 180 of these 284 fields will have ceased production due to natural decline, trade body Offshore Energies UK (OEUK) warned.
The industry needs the churn of new licences to ensure no cliff edge in domestic production, said OEUK, which warned that without fresh investment the UK would be reliant on oil and gas imports for 80% of its needs by 2030.
Oil and gas today contributes about three-quarters of the UK’s domestic energy demand and will continue to play a role in its energy mix for decades to come.
“As recognised by the independent Climate Change Committee — we’ll continue to need oil and gas over the coming decades as we deliver net zero,” UK Energy Security Secretary Claire Coutinho said.
“It’s common sense to reduce our reliance on imports and use our own supply — it’s better for our economy, the environment and our energy security.”
The NSTA explained that other marine users are taken into consideration throughout project life cycles, including at the licence award and stewardship process stages.
Developing a site typically requires additional consents, including from the Department of Energy Security & Net Zero. The NSTA works closely with government, regulators and other bodies such as the Crown Estate and Crown Estate Scotland to manage this process and to identify — and mitigate as appropriate — important spatial co-location considerations.
“Ensuring that the UK has broad options for energy security is at the heart of our work and these licences were awarded in the expectation that the licensees will get down to work immediately,” NSTA chief executive Stuart Payne said.
“The NSTA will work with the licensees to make sure that where production can be achieved it happens as quickly as possible.”
A recommendation for the remaining 203 blocks will be made once the Habitat Regulation Assessment Further Appropriate Assessment process has been completed.
Strengthening energy security
On Monday, the OEUK said the award of the new oil and gas licences would strengthen the nation’s homegrown energy security as the sector continues its expansion in wind, hydrogen and carbon capture and storage.
“Last year filling the fuel import gap cost the UK £117 billion [$142 billion]. 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,” OEUK chief executive David Whitehouse said.
“Energy security is national security. We need pragmatic policy and political consensus if we are to realise £200 billon 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.”