UK to welcome oil and gas exploration with ‘new look’ licensing rounds: offshore regulator
The chairman of UK North Sea regulator the Oil & Gas Authority, Tim Eggar, said Nov. 24 the agency expected to launch shortly a “new look” system of offshore licensing rounds once consultations are complete, after a pause that has fueled worries about the industry’s future and its ability to replenish production.
In a speech to the Petroleum Exploration Society of Great Britain’s Prospex conference, Eggar defended his agency’s focus on gas as a transition fuel that would help create demand in the nascent hydrogen fuel industry, but said there was no reason for explorers not to search for oil once the current pause in licensing, announced more than a year ago to align the process with UK climate goals, comes to an end.
The comments follow criticism that the oil and gas sector was largely excluded from a public role in COP26 climate talks earlier in the month in Glasgow, amid pressure on the industry to adopt a low profile during the talks.
Statements by Scottish First Minster Nicola Sturgeon opposing the granting of development approval for the 500 million barrel Cambo oil project have fueled disquiet, with some in the industry arguing the ability to search for oil specifically remains vital, especially for larger companies, despite gas price spikes.
UK oil production, at the heart of the Dated Brent benchmark, was down 19% over the first eight months of 2021 at less than 900,000 b/d, partly on the back of the pandemic. S&P Global Platts Analytics expects a slight recovery in 2022, before a decline to around 550,000 b/d by 2030.
Eggar played down the impact of Scottish opposition to oil developments such as Cambo, saying the Edinburgh authorities had an important role in developing wind power and links to oil and gas infrastructure, but that oil and gas licensing remained within London’s purview.
He said the OGA would be “ready to go” on new exploration licensing once the new process had been approved, including ‘climate compatibility checkpoints,’ which would follow publication of a consultation document in the coming weeks.
While the government itself has the final say, “at the moment I can’t see any reason why we wouldn’t go on exploring for oil and for gas,” Eggar said, noting often oil and gas finds could not be separated.
The UK put its annual exploration licensing rounds on hold in September 2020 against a background of a collapse in drilling activity in UK waters, a lack of major new projects, and declining oil and gas production, but with the country gearing up to host COP26 talks.
The government has said the redesign of the process will be complete by year-end. However, a second consultation is also underway by environmental regulator the Offshore Petroleum Regulator for Environment and Decommissioning, which is expected to take longer and also be a prerequisite for new licenses.
“We expect the government to publish the consultation document on the checkpoint shortly. There is no current ban on exploration and licensing and the OGA will be ready to go with a new-look licensing round if that is the way forward that’s decided by government after the consultation,” Eggar said.
“The industry must demonstrate its appetite for new investment alongside its commitment to the transition,” he added. “We’re confident that with all the checks and balances and the net-zero scrutiny that we apply throughout the life cycle, we’re now in a good position to continue delivering huge value to the UK PLC and to industry, fully in line with our enhanced environmental obligations.”
On Nov. 23, UK Secretary of State for Business, Energy & Industrial Strategy Kwasi Kwarteng told a Reuters event there were no plans to “switch off” the oil and gas sector, arguing it was needed to develop new low-carbon technologies.
Eggar, asked by Platts if the Scottish administration would influence approval of fields such as Cambo, said: “We have a regular and constructive dialogue with the Scots,” particularly on floating wind projects, but on oil and gas, “what we do is not devolved to them.”
“But they have been generally very supportive particularly on the carbon capture and storage side, on developments in Aberdeen, they provide a lot of money for the industry as a whole,” he went on to say.
“They are part of what I would call a variegated political landscape with which we interact productively. The relationship is actually, given the different powers and the different obligations of ourselves and of Holyrood, I think it’s a very constructive relationship.”