New opportunities for North Sea oil and gas
The Government is taking further steps to support the UK’s transition to net zero by confirming new licensing opportunities
- Government to mandate annual oil and gas licensing to bolster UK’s energy security and reduce dependence on imports from overseas
- Certainty on future licensing will help secure 200,000 jobs and billions in tax receipts
- Licensing rounds will support lower carbon emissions and be contingent on specific tests to transition to net zero
The Government is taking further steps to support the UK’s transition to net zero in a pragmatic, proportionate and realistic way, confirming new licensing opportunities that will protect British jobs and bolster energy security, reducing the UK’s reliance on imports from hostile foreign regimes such as Russia.
Legislation to be set out later this week in the King’s Speech will require the North Sea Transition Authority (NSTA) to invite applications for new production license on an annual basis, providing certainty and confidence to investors and industry.
The UK still relies on oil and gas for most of its energy needs, and data published by the Climate Change Committee shows that the UK will continue to rely on oil and gas to help meet its energy needs even when the UK reaches net zero in 2050.
Encouraging domestic gas production, rather than importing higher-carbon emitting liquified natural gas from other countries, means lower carbon fuels for the UK and also benefits families and businesses. The combined oil and gas industry supports more than 200,000 jobs and adds about £16 billion to the UK economy annually.
We are reducing our vulnerability to imports from hostile states, leaving us less exposed to unpredictable international forces. This will ensure we have a more secure and diverse energy system and as we make progress on renewables and new nuclear, our more robust energy mix will help to lower household bills in the long-term.
Each annual licensing round will only take place if key tests are met that support the transition to net zero. The first test is that the UK must be projected to import more oil and gas from other countries than it produces at home.
The second is that the carbon emissions associated with the production of UK gas are lower than the equivalent emissions from imported liquefied natural gas.
If both these tests are met, the NSTA will be required to invite applications for new licences annually.
The legislation is part of a King Speech that will prioritise the long-term decisions that will safeguard the prosperity of our country.
Prime Minister Rishi Sunak said:
“I am proud that the UK is a world leader in reducing emissions, and of our new plan to transition to net zero without adding undue burdens on households and securing the country’s long-term interest.
“Domestic energy will play a crucial role in the transition to net zero, supporting jobs and economic growth, while also protecting us from the volatility of international markets and diversifying our energy sources. The clarity and certainty that our new legislation will provide will help get the country on the right path for the future.”
The UK’s oil and gas industry has an important role to play in the UK’s energy transition.
Production from new gas and oil fields in the North Sea can be much cleaner than producing hydrocarbons from older existing fields, reducing the emissions impact of future production.
Domestic production will help unlock green investment, drawing on the key role our oil and gas industry plays, and driving forward investment in clean technologies that we need to realise our net zero target.
Secretary of State for Energy Security and Net Zero Claire Coutinho, said:
“The UK has cut its emissions faster than any of its peers. But as the independent Climate Change Committee acknowledges, we will need oil and gas even as we reach net zero in 2050.
“As energy markets become more unstable it’s just common sense to make the most of our own homegrown advantages and use the oil, gas, wind and hydrogen on our doorstep in the North Sea. Rather than importing dirtier fuels from abroad, we want to give industry the certainty to invest in jobs here and unlock billions of pounds for our own transition to clean energy.”
Offshore Energies UK CEO David Whitehouse, said:
“The UK needs the churn of new licences to manage production decline in line with our maturing basin. A predictable licencing process with transparent checks will support the highly skilled people working in the sector, while ensuring the granting of new licences is compatible with energy security and net zero.”
“We all recognise that our energy system must change, and the offshore energy sector is committed to delivering on the climate goals of the UK. While we continue to use oil and gas, we should prioritise our homegrown production to support our energy security, our economy, our jobs, and our world class supply chain that will be the foundation of our low carbon future.”
Jon Butterworth, CEO of National Gas, said:
“Gas is the backbone of our nation’s energy system – and it is vital we make the most of the abundant resources we have to keep the lights on, homes warm and businesses running.
“That’s why National Gas are delighted to see the government give their firm backing to the UK’s gas sector today - maintaining the security of our energy supply and ensuring we can continue to power the country as we transition towards net zero.
“By backing gas today and embracing hydrogen for the future – we can create jobs, secure energy independence, deliver net zero, and keep costs down for households and businesses.”
The UK is committed to delivering on its climate goals and achieving net zero by 2050. The Government’s record reflects this – we achieved the fastest rate of greenhouse gas emissions reductions of all G7 countries between 1990 and 2021 – and we are scaling up our renewable energy supplies, including wind, solar and nuclear. Renewables already generated a record 48.1 per cent of our electricity in the first quarter of this year.
The UK’s current dependence on fossil fuels (75 per cent) is similar to other advanced economies. Japan gets 85 per cent of its energy from fossil fuels, the United States 81 per cent and Germany 76 per cent.