Over one hundred bids have been made for new oil and gas projects in the North Sea, in a huge vote of confidence for the embattled industry.
The North Sea Transition Authority (NSTA) has revealed that 76 companies made a total of 115 bids across 258 blocks in the UK’s latest offshore oil and gas licensing round.
This is comparable to the numbers in the previous licensing round in 2019 when the NSTA received 104 applications from 245 blocks.
The bidding process, which opened on 7 October and closed last week, includes four priority areas.
These areas all have known hydrocarbons (oil and gas), in which there has been “very keen interest”, according to the NSTA.
It has calculated these sites could see production in as little as 18 months – helping to ramp up energy security and ease potential supply shortages.
This would be a sharp reduction in typical development times, as NSTA analysis shows that the average time between the dates of recent discoveries and first production has been close to five years.
The watchdog hopes that since they consist of existing discoveries, the priority cluster areas can go into production in a much shorter timeframe.
The latest developments are a huge boost to the North Sea amid investor fears of a potential drop off in bids following the ramping up of the windfall tax in recent month.
There has also been sustained criticism from Scottish Power and SSE over the new renewable tax.
Chancellor Jeremy Hunt hiked the Energy Profits Levy from 25 to 35 per cent at the fiscal event last November, and extended its duration until 2028.
He also brought in an Electricity Generator Levy targeting legacy renewable generators.
Both taxes are expected to collectively raise £55bn, with which Downing Street is hoping to harness record earnings across oil and gas producers from soaring wholesale prices last year to help fund support packages for households and businesses grappling with record energy bills.
The NSTA will now study the bids, with plans to award licenses quickly and help support successful bidders go into production as soon as possible.
The next steps after licensing include necessary consents before production to ensure developments are also in line with the UK’s net zero ambitions.
New developments tend to have lower emissions than older fields, and are less carbon intensive than LNG which has to be transported from overseas – with around double the carbon footprint.
Oil and gas currently contribute around three quarters of the country’s domestic energy needs.
Despite the latest levies, the industry is facing calls from Labour for investment relief to be scrapped from the tax – which currently offers up to 91p in the pound in compensation for companies that build new projects.
Industry still faces North Sea decline
The UK produces around 45 per cent of its gas domestically and just under 40 per cent of its oil supplies.
The Climate Change Committee, Westminster’s independent advisory group, predicts half of the UK’s energy requirements between now and 2050 will still be met by oil and gas, and as much as 64 per cent of UK energy needs between 2022 and 2037.
The UK is a mature basin and the NSTA has previously warned in its resources report that without further exploration the UK faces a cliff edge in production decline and increased reliance on imports.
Industry body Offshore Energies UK published its economic report on the sector last year, which revealed that just five exploration wells were drilled in 2021.
This was the lowest total since the North Sea sector was opened up to development nearly 60 years ago. Without further exploration, oil and gas generation could fall sharply by the end of the decade.
Alongside the licensing round, NSTA has licensed Centrica’s Rough gas storage facility which is now back online in reduced capacity.
Dr Nick Richardson, NSTA head of exploration and new ventures, said: “We have seen a strong response from industry to the round, which has exceeded application levels compared to previous rounds. We will now be working hard to analyse the applications with a view to awarding the first licences from the second quarter of 2023.”
Energy and climate minister Graham Stuart said: “It’s fantastic to see such interest from industry in this round, with the awarded licences set to play an important role in boosting domestic energy production and securing the UK’s long-term energy security of supply.”