UK aims to boost North Sea oil and gas production with new licences every year

Legislation is set to be announced in the King's Speech this week

An oil rig anchored in the Cromarty Firth, in Invergordon. The oil and gas industry adds about £16 billion to the UK economy. PA

Oil and gas production in the North Sea is to be boosted by a new system of annual licensing.

The move comes after the UK government announced 27 new licences to give operators the opportunity to explore and develop oil and gas resources.

Legislation, to be set out this week in the King’s Speech, will require the North Sea Transition Authority to invite applications for new production licences on an annual basis.

The government said the UK would require oil and gas even when it achieves net zero emissions. It has called for as much as possible to come from domestic production, rather than imports.

North Sea production will also help to reduce vulnerability to countries including Russia, the government said.

UK Prime Minister Rishi Sunak announced a new push for North Sea oil and gas in the summer as he looked to draw a dividing line on environmental policies before an election next year.

He said the new licences were of the “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,” Mr Sunak said.

“The clarity and certainty that our new legislation will provide will help get the country on the right path for the future.”

Annual licensing rounds will only take place if key tests are met that support efforts to achieve 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.

The oil and gas industry supports more than 200,000 jobs in the UK and adds about £16 billion ($19.8 billion) annually to the economy, the government said.

The licensing announcement was welcomed by industry body Offshore Energies, which has said there are 284 active oil and gasfields in the North Sea. Within seven years, 36 per cent of them will have ceased production due to natural decline, it said.

“The UK needs the churn of new licences to manage production decline in line with our maturing basin,” said Offshore Energies chief executive David Whitehouse.

“A predictable licensing 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.

“While we continue to use oil and gas, we should prioritise our home-grown 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."

The move comes after Rosebank, the UK's largest untapped oilfield, was granted approval by UK regulators in September.

The oilfield off Shetland could produce almost 70,000 barrels a day at its peak, about 8 per cent of the UK's projected daily output between 2026 and 2030.