UK to legislate for yearly North Sea licensing rounds

The UK government announced today that it plans to legislate for a yearly North Sea oil and gas licensing round. There is no fixed period between licensing rounds in the UK currently.

Legislation will be set out in the King's Speech on Tuesday requiring regulators to invite applications for new licences on a yearly basis, provided that two key tests are met. The speech sets out the programme of legislation that the government intends to pursue in the forthcoming parliamentary session.

The first test is that the UK must be projected to import more oil and gas from other countries than it produces domestically. 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.

These tests were already introduced by the government in a "Climate Compatibility Checkpoint" — aimed at ensuring future licensing fits with the UK's climate objectives — in September last year, just ahead of the UK's 33rd offshore oil and gas licensing round.

If both tests are met, UK offshore regulator the North Sea Transition Authority will be required to invite applications for new licences every year. Licensing rounds in the UK have typically happened once a year, although the regulator took a "temporary" pause in 2020 and did not launch a new round until October last year. Any new developments arising from licensing rounds have to comply with targets set under the North Sea Transition Deal agreed in 2021 by the UK government and the country's upstream oil and gas sector. It sets greenhouse gas (GHG) emissions reduction targets of 10pc by 2025, 24pc by 2027 and 50pc by 2030 — all from a 2018 baseline.

"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," UK prime minister Rishi Sunak said in a statement accompanying the licensing announcement.

The move also received support from trade group Offshore Energies UK, whose chief executive David Whitehouse noted that the UK needs a "churn of new licences to manage production decline in line with our maturing basin".

But environmental activist group Greenpeace, in a post on X (formerly know as Twitter), reiterated that "more oil and gas won't lower our energy bills". "It will condemn communities to more extreme weather like storm Ciaran in [the] future", referring to the recent storm that has caused flooding and deaths across Europe.

Last month, Greenpeace lost a legal challenge against the government's decision to launch a new licensing round, which the group said it would appeal.

By Jon Mainwaring