Major Energy Players Propel North Sea Oil and Gas Output Growth with New Licenses

Shell, Equinor, bp, Total, and NEO are among the 17 companies awarded a total of 24 licenses in the second tranche of the 33rd oil and gas licensing round. These licenses, crucial for job security and overall economic benefits, follow the initial allocation of 27 licenses in October of the preceding year. The 74 blocks and part-blocks awarded this time are exclusively offshore, spanning the Central North Sea, Northern North Sea, and West of Shetland areas.

The outstanding blocks, predominantly located in the Southern North Sea and East Irish Sea, will be offered once environmental evaluations, including Habitat Regulation Assessment (HRA) Appropriate Assessments, are finalized by OPRED. The comprehensive 33rd oil and gas licensing round commenced in October 2022, making over 900 Blocks available. The application window closed in January 2023, receiving 115 bids from 76 companies, underscoring the industry's continued interest in exploring the UK Continental Shelf.

This licensing round is integral to the North Sea Transition Authority’s (NSTA) efforts to bolster the oil and gas industry, which presently fulfills approximately three-quarters of domestic energy needs. It is expected to persist in this role even as demand decreases. NSTA's internal analysis reveals that the average time from licensing to initial production is nearly five years. Consequently, licenses awarded now could contribute to production before the decade concludes.

Beyond providing skilled employment and supporting the economy, domestic energy supply assumes a crucial role in reducing greenhouse gas emissions, facilitating the UK's ongoing decarbonization of domestic production. Emissions from production have already decreased by over a fifth between 2018 and 2022. Projections indicate that the sector is on course to meet reduction targets of 10% by 2025 and 25% by 2027, as outlined in the North Sea Transition Deal of 2021.

On January 17th, the NSTA provided its approval for Development and Production Consent for the Victory gas field, endorsing a venture anticipated to generate a total net gas output equivalent to the average gas consumption of 4.6 million UK households for one year, or sustain all homes in Scotland for 1.5 years.

In addition to traditional oil and gas, the NSTA has been actively involved in carbon storage, awarding 21 licenses in 2023. Moreover, the NSTA has been designated as the offshore transport and storage regulator for hydrogen, aligning with the overarching goal of achieving net zero by 2050.

With this recent batch of licenses, the total offers reach 51, with more anticipated pending the completion of environmental checks. These licenses have the potential to significantly contribute to UK energy production and economic benefits. The NSTA will collaborate with licensees to expedite the production process. Recognizing the ongoing need for oil and gas in the coming decades, maximizing domestic resources is deemed essential, particularly as domestically produced gas is nearly four times cleaner than importing liquefied natural gas from overseas.

These new licenses represent a strategic move to fortify energy security and economic stability, supporting an industry that sustains 200,000 jobs and contributes £16 billion annually to the UK economy.